Advertising: Don’t believe everything you read and hear
We’ve all heard, read or seen advertising for a great investment opportunity in the media. We’ve been tempted by the “free” lunch financial seminar being promoted during our drive home or advertised during our favourite TV shows. Since these investments and the people promoting them are featured in the media, we assume we can trust them to invest our hard-earned money. Unfortunately, if you don’t check further, that assumption can cost you your life savings.
This was recently highlighted by the Alberta Securities Commission’s (ASC) Wealthstreet Inc. and David Jones decision. The ASC found that Jones acted as an adviser without registration and he attracted a number of investors through exposure to his radio and TV promotional segments. The ASC found that Jones knew that the considerable degree of trust and confidence Wealthstreet clients and potential clients placed in him was fostered by his advertising campaigns. Unfortunately, Jones’s advice turned out to be disastrous and several of his clients now find themselves in financial hardship, caused by the highly questionable investment strategy recommended by Jones – leveraged investing in high-risk, illiquid securities.
No matter the source, investors must protect themselves and investigate the facts behind any investing-related advertisement. Anyone selling you an investment opportunity must be registered with the ASC. The ASC has unbiased resources and tools to help investors check out the opportunity before they invest. Investors should never assume an investing opportunity is authentic based on where it appears or how it is presented.
Some things investors should watch out for:
- Promises of high-return, low-risk investment opportunities. Ads may promote quick and above-average growth and “guaranteed security”. Refer to current bank rates. Above-average growth involving little risk on your part should ALWAYS be questioned.
- Liberal use of financial jargon. Sometimes, ads use sophisticated language to convince investors that the people behind the opportunity are professional, knowledgeable and experienced. Anyone can use financial lingo to sound convincing, so don’t take it at face value.
- Free seminars and workshops. In addition to promoting free registration, the ad may offer incentives, like free food, gifts, etc. for participating. Be cautious if you attend one of these sessions. The session may focus on investing or tax-savings strategies or it may end up promoting a specific investment. Don’t commit until you’ve checked into the person and firm offering the opportunity.
- High-pressure sales tactics. The ad may urge you to act now and invest while the opportunity’s hot. A sales tactic like this doesn’t necessarily mean you’re a target of a scam, but it is a method some scammers use. The point is you should NEVER feel pressured to invest. If it’s a good opportunity, it will be there long enough for you to check into it first to make sure it’s legitimate.
- Company or individuals’ purported ‘track record’. Many ads promote the fact that the company or person offering the opportunity has been in business a long time, is backed by a large conglomerate, and/or has achieved high performance in years past. A company’s track record should not be the deciding factor when making an investment decision. Research the company’s history and track record but also take other factors, such as your investment objectives, into account before committing.
- Requests for personal information. Ads may send you to a toll-free line, website or a free seminar so you can request more information or fill out an application form. Check to ensure the investment opportunity is legitimate before submitting information. If it is a potential scam, your personal information could be shared, sold or held for use in future scams.
- Tax-savings or tax-shelter incentives. The tax angle is an effective attention-grabber. A toll-free number, website or free seminar may be promoted to explain how the tax savings work. Promoters that tell investors that a tax shelter identification number means the shelter has been approved by CRA are misleading investors. In actual fact, the identification number is for identification purposes only and does not in any way confirm the entitlement of an investor to claim any tax benefits associated with the tax shelter.
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About this Blog
We’ve created this blog to present you with answers to some of the more popular questions we receive from investors. We'll have different subject matter experts blogging about what they know best and we'll update it as new blogs arise. We hope you'll find it interesting and helpful.
My name is Mark Dickey and I’m the Senior Advisor, Communications at the Alberta Securities Commission (ASC). Before moving into communications and ending up at the ASC, I worked in federal/territorial politics and was a radio news director and legislative reporter. A theme running throughout my career is working to communicate with the public so they have the information they need to make informed decisions. In my current job, this information is geared towards helping people protect themselves against unsuitable investments and investment fraud.
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