How to Protect Your Investment Portfolio from the Voracious Sales Reps

No matter what the investment you're making, a sales expert is always on the other end of the negotiating table closing the deal with you. These people are highly skilled and trained in the techniques that get other people to hand over their money. That's what they do for a living. They're working in their own (or their employer's) best interest, not yours. They must meet a quota of sales in order to avoid losing their jobs.

That means the responsibility is on you to look out for your own best interest. No matter how profusely one may argue to the contrary, absolutely no one in an investment deal is worried about safeguarding your hard-earned money but you. The only real assets you have to protect you, then, are your knowledge, experience, and whatever due diligence you perform.

These apparent experts in investing are really experts in sales - that is their primary business. Otherwise, they'd be independently wealthy from scads of successful investments and wouldn't bother selling investments to make ends meet. While that may, in cases, seem like an exaggeration, the fact of the matter is that the investment professionals, with whom you must deal as part and parcel of investing, will behave in all regards as though they're looking out for you - but they are not.

See what happens after you sign a contract or write a check, if you don't believe this to be true. In far too many cases, their availability to assist you in whatever you may need will suddenly vanish. Your phone calls suddenly stop being returned or, if they are, then certainly without the due haste that successful investing generally requires. And all of a sudden you discover a caveat in the fine print that makes profitability on your investment improbable at best, near impossible at worst.

A sales pitch is just that - polished and practiced. To truly assess the value, legitimacy, and profit potential of any investment (as well as that of the investment "professional" him or herself) requires industry-specific knowledge and experience. Without that, or an appropriate mentor at your side, the odds are stacked against you walking away from the bank or brokerage with any part of original investment, much less a profit.
Consider the loan officer who solicits an individual to get involved in a commercial building with a triple-net lease by taking out a loan for a million dollars. A few carefully chosen questions could reveal that the broker, while an expert in lending, knows next to nothing about commercial real estate. Yet this person might very well be the Principal Agent in this deal. Of course, anyone can be a Principal Agent if they can raise the money to close the deal. That's all it means. And yet, it seems so authoritative.

All a broker acting as Principal Agent is vying for is a fat commission check when they close the deal with you. From that point on, they have no stake, and therefore no interest, in the success or failure of the investment. Sure, one could argue that the broker's "stake" is future business from you and word-of-mouth referrals to everyone you know. But they can easily fall back on convenient investing catechisms like "all investments involve some element of risk" and they're halfway to hooking you for the next bad deal.

Before getting involved in an industry, it is necessary to study that industry, learn its language (its jargon). Talk with people who have experience in the vehicles and industries you're considering investing in but have no stake in doing business with you. That way you'll get the most honest and unbiased perspective you can have on the investment before making any decisions, or worse, financial commitments.

And once you've decided to invest in a particular area, don't just plop your money down on the first good thing you see. Shop around. Ask tons of questions. Then verify the answers you get through alternate, independent sources. Foster in yourself a healthy dose of skepticism and leave no stone unturned.

Hire an independent financial consultant, an attorney, or an accountant to help you review any investments you're considering. Build yourself a team of experts whose only job is to support and protect you, their client. Unless they're working directly for you, everyone is a salesperson. Don't let some sweet-talking sales rep convince you to make any decisions that don't come from your own due diligence. It is your money, after all.

Kenneth C. Kelly is the President of Strativia, a financial management software development and services company specializing in applications for personal and business use.  Strativia is the developer of Budget Forecaster, a sophisticated home budget and personal finance management software package.  Website: www.strativia.com.  Contact: info@strativia.com.

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