RICHMOND — It is not uncommon for representatives of banks and investment firms to recommend financial products and services such as investment products to their clients. By cross-selling, financial professionals encourage investors to purchase securities related to their original investment. In some cases, these representatives may try to capitalize on a pre-existing positive relationship with a client to induce them to increase their investments or invest in a new product.
When done properly, this marketing technique can be lucrative for the firms and their representatives and can sometimes make sense for the client. While the practice is legal, it can backfire for consumers, particularly if a representative tries to push a product outside of their scope of knowledge or an unregistered securities product.
Ron Thomas, director of the State Corporation Commission’s Division of Securities and Retail Franchising, urges Virginians to take appropriate precautions whenever they invest. “In some cases, cross-selling may be mutually beneficial to financial firms and their clients. It allows these firms to inform clients about the range of financial products and services available,” he said. “At its worst, this common sales technique can mislead clients into acting against their best interests.”
Whenever investing, Thomas cautions Virginians to beware of unsolicited investment offers, aggressive sales tactics and promises of high returns with little or no risk. He encourages investors to protect their financial interests by asking questions and getting details about any investment offer in writing. Find out how the investment will generate returns, the time frame for payout, any associated costs and how your financial professional will be compensated. “Make sure an investment and the person offering it are registered and the investment suits your particular needs,” Thomas said.
To learn more, contact the SCC Division of Securities and Retail Franchising at 804-371-9051 or toll-free in Virginia at 1-800-552-7945. You may also visit the division’s website at www.scc.virginia.gov/srf/index.aspx or the North American Securities Administrators Association’s website at http://www.nasaa.org/47635/informed-investor-advisory-cross-selling/.