Telemarketing Investment Advice

I hope you’re already smart enough not to take investment advice from a stranger who cold-calls you. In case you’re tempted, however, consider how adverse selection affects the type of person likely to offer unsolicited investment advice over the telephone.

Imagine a highly successful investor who has had a string of great ideas that have earned her lucky clients millions. Everyone on Wall Street desperately wants to lunch with her. Now, is this woman likely to cold-call you to let you in on her latest deal?

The type of person most likely to make random calls to strangers probably lacks the knowledge to give you intelligent investment advice. If your cold caller makes a low salary, then he obviously doesn’t have a lot of marketable skills. Even if your cold caller prospers at his job, you still shouldn’t trust him.

I suspect that a sophisticated understanding of finance does not help someone become a successful telemarketer. Rather, being a good telemarketer probably requires great salesmanship skills: the ability to sell things to people that they really don’t need. Telemarketing companies probably attract either people who have very little ability to make money outside of telemarketing, or people skilled at selling unneeded products. Either way, the people most likely to cold-call you are the people you should least trust for financial advice.