Giving Cold Callers the Cold Shoulder

Financial Industry Regulatory Authority (FINRA)
Giving Cold Callers the Cold Shoulder
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Investment cold calls are alive and well. ©iStockphoto.com/desperado

We live in the Internet age, but the investment cold call is alive and well. Here's what you need to know about unsolicited sales calls, and how to avoid getting stuck with a bad investment.

Common Sales Tactics

Cold calling remains a legitimate way for brokers to prospect for business and sell suitable investments. Unfortunately, the cold call is also used by unscrupulous people whose only goal is to separate you from your money. There's a familiar ring to the kinds of cold calls associated with high-risk or fraudulent investments. Here are three common tactics:

1. High-pressure persuasion. The caller uses persuasion tactics such as time limits and scarcity to pressure you to invest. You may hear phrases like "this offer is good today only" or "there are only a limited number of shares." The salesperson is persistent—perhaps aggressive—and tries to wear you down with repeated calls.

2. The three-call system. First, there's an introductory call. Next comes a second call meant for you to develop a comfort level with the salesperson and product. Third, the sales pitch, a well-crafted enticement to get you to buy.

3. Sell, and buy. The caller encourages you to sell a listed or more well-known security and buy an obscure security sold by the salesperson.

Tips to Cut Down on Cold Calls

These four tips can help you give cold callers the cold shoulder:

1. Just say "no." Tell the caller, "I'm not interested." Then hang up.

2. Get on a brokerage firm's "do-not-call" list. Brokers are allowed to make calls between 8 a.m. and 9 p.m. They must identify themselves by providing their name, firm name, address or phone number. If you do not want such calls, ask the caller to place you on the firm's "do-not-call" list. You can also put your name on the National Do Not Call Registry. Call 888-382-1222 from the phone you wish to register, or register online.

3. Learn to spot persuasion tactics. Beware of sales pitches that make exaggerated claims about the expected profitability of a particular investment, or make specific price predictions, such as "your money will double in six months." If it sounds too good to be true, it usually is.

4. Ask and check. Ask if the caller is registered to sell securities, and whether the security itself is registered. Then verify for yourself. More information on how to ask and check can be found at SaveandInvest.org.

Gerri Walsh is Senior Vice President of Investor Education at the Financial Industry Regulatory Authority (FINRA).

FINRA is the largest independent regulator for all securities firms doing business in the United States. Our chief role is to protect investors by maintaining the fairness of the U.S. capital markets. FINRA does not endorse, sponsor, or guarantee, nor is it sponsored by, any advertisers on this site, and any dealings with those advertisers are solely between you and the advertisers.

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