Insider Hint: Brokers Are People Too

Provided By www.investmentoption.org

A stockbroker finds his customers mostly among that minority of investors already accustomed to owning stock; he cannot rapidly make converts from among investors acquainted only with fixed-price items. Somewhat the same condition exists in any other business, and is even worse in such fields as politics, religion, and art.

A man can sell investments without knowing much about them. He can make out all right with a pleasing or imposing personality, plus a bit more knowledge or gift of gab than his customers have. A conscientious salesman tries to enlarge his own knowledge of what he is selling, and to raise the standards of his customers. If he can collect a group of customers who appreciate his efforts, maybe he will be successful.

But probably an easier way to build up sales is to play on customers' weaknesses. Life-insurance agents often aim at a man's emotion, his fear of death, his love of his family, and his desire to make them "secure." Apparently many life-insurance salesmen don't even bother to find out what other insurance companies offer, let alone knowing whether an entirely different type of investment might be better for the buyer.

Turning to a quite different situation, a stockbroker or adviser can take in more fees if a customer buys and sells frequently rather than if he holds on to investments for a long time. So it is not surprising if a broker yields to the temptation to work on a customer's desire to gamble or to get rich quick. It is not necessary for the salesman to offer a careful estimate of what will happen in the future on the stock he wants to sell. His main sales argument may be some stories of how greatly a man's capital would have multiplied if he had bought certain stocks at just the right time, years ago.

Advertisements and published articles on investing generally use arguments of the sort just described for salesmen.

Many people love to be associated with big names in whatever they do. To this type of customer a salesman of most any sort of investment may say: "Henry Jones, who as you know is president of the largest corporation in town, has invested $100,000 in this." The implication is that anything good enough for Mr. Big, must be O.K. for the little fellow. The question whether Mr. Big knows anything about investing does not arise.

A salesman working in an organization earns his income only by selling what his outfit offers. If he wants to hold his job and be promoted, he must make big sales. So naturally he is tempted to overload his customers with the items offered by his organization. He cannot afford to offer impartial advice, and to shield his conscience he convinces himself that what he is selling is the best for his customers under all circumstances. Once a man has established himself in one organization, a change to another outfit may be quite difficult, and may cut his income severely. So regardless of his private opinions, he keeps on selling for the old company.

These people aren't bad people, but they want the same thing you want: money. Before you make serious investments, do some research of your own so you can tell the broker or the agent what you want and be secure in your own knowledge without relying upon the advice of a broker who might not be quite objective.

This article is a small snippet from www.investmentoption.org

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