When I do watch TV, it’s usually in the obscure hours of the night because I’m looking for a little break from reading prospectus or crunching numbers. Of course, I’m inundated with infomercials of every kind. The most frightening ones that I’ve seen so far has to do with investments. As an adviser, I’ve been horrified at the sheer amount of risk that is being held out to normal average Americans as a safe investment.
Infomercials are big business; profitable for everyone involved except the customer. The State of California just filed a lawsuit against TV Tax Lady, Roni Deutch, for swindling people in desperation. I have not seen her infomercials but it must be successful because their annual revenue is $25 Million.
She built her business by getting on the prime time channels and being featured as a tax expert by NBC Today’s Show, CNN and CNBC. This gave her credibility to get trust from the viewers when they see her infomercials. It’s important to remember that TV experts are not necessarily correct or true in their statements. They are there to provide sound bites and entertainment.
Prospective clients received high pressure sales tactics and incredible promises such as 99% tax reduction with the IRS. This to me is a red flag.
Whether the lawsuit is valid or not, hopefully it will raise consumer awareness. Note that the Attorney General, Jerry Brown, is running for governor of California and a splashy lawsuit like this will raise his visibility. He brought up this issue of tax scams in March 2010 but held off on doing anything until just before the upcoming election. Because the lawsuit was filed by a politician running for the top office, I need to play devil’s advocate and recognize that people do get used by politicians for media purposes.
TV Tax Lady aside, there are many other infomercials that has the potential to bankrupt many viewers.
One is currently running as an options academy and targeted boomers and seniors. Every single person in the commercial was over 60 years old. Let me say it now. STOP before you invest. Options when used appropriately can provide additional income IF you already own the stock and have a tax plan in place for the eventual sale of that stock. Buying and trading uncovered options is a massive risk that even seasoned professional traders are extremely careful about. It requires time, effort, research and systematic planning to execute well. A casual investor who only knows the concept of mutual funds is not a good candidate.
There are many others commercials that is running daily about investments from gold to foreign exchange. They target the greed and fear that most investors feel right now.
It is important for you as the consumer to always check and double check the advisers and programs that you choose. Even if you’re desperate, take the time to do your due diligence. Before you do anything, check with the various government resources and learn about the investments. This will give you a base to ask questions.
For example, if you are looking at options, check out the Chicago Board Option Exchange (CBOE). Read the Securities and Exchange Commission (SEC) section on options. Check out investor.gov for questions and answers to basic concepts.
Until you have your own trusted financial adviser research a potential investment, you need to protect yourself from the wolves.
Dear readers, what are some wild infomercials about investing and ways of separating you from your money that you’ve seen?
© 2010 MoneyandRisk.com all rights reserved
