Telephone Solicitations

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What to avoid in a commodities broker

As a licensed commodities broker (complete with National Futures Association Ethics Training) I hear many horror stories about first time investors (and some seasoned veterans who should know better) who get involved with dishonest brokers. What causes them to get involved with these dishonest brokers? A story that sounded too good to be true. A story that, when told by a skilled story teller, was one that the investor couldn't pass up. I am going to cover telephone solicitation do's and don'ts on a monthly basis.

Here's how it works: An individual has an interest in commodities and orders a book on-line or from an add in a trading magazine. The name, address and most importantly, telephone number is sold to a brokerage house. This "prospect lead" is then given to a broker. The broker calls up and starts his sales pitch. Here is a sample pitch. I want you to read it carefully because we're going to break it apart later in this article:

01. Mr. Jones?

02. It's Bob Smith here at J.P. Moran. How are you today? (The prospect usually says I'm all right).

03. I'm calling you today to tell you about a terrific opportunity in the financial markets.

04. Mr. Jones, I want you to pay careful attention. Are you ready? (The prospect says yes)

05. By the way, can you hear me?

06. Let me give you the financials first.

07. What I'm looking at takes as little as $5,000.00 to come on board. If I'm right, I think I am, we'll bring back

between $6,000.00 and $10,000.00 in the next 30 to 45 days.

08. You can handle $5,000.00 to bring back $10,000.00, right Mr. Jones (of course the prospect will say yes)

09. Have you seen those stories on the news about the big drought that's hit the southern portion of the

United States?

10. This is where the U.S. grows the majority of it's wheat!

11. Mr. Jones, everyone eats wheat.

12. You're a businessman. What will happen to the price of wheat, or any other product for that matter, if

are low supplies are low and demand is high? Prices go up.

13. I'm buying wheat options on a major U.S. exchange and if I'm right and I think I am, well bring $10,000.00

on top of the original $5,000.00

14. Obviously, timing is everything.

15. Now before I have my secretary overnight an application to you, I want to tell you about the two kinds of

men that live in our world.

16. There are those who sit on the sidelines and watch the game and there are those that get out on the field

and play football. Which one are you Mr. Jones?

17. Good you're a real man. Now where do you want the application.

This is a boiler room pitch. The prospect learns nothing about the underlying commodity, not even the name of the exchange on which it's traded. He is told he can double his money in as little as a month. Now Mr. Jones gets boxed into a corner when asked if he is a real man. An important line "timing is everything" is a subliminal attempt to get the prospect used to quick decision making. The idea here is to force the prospect into making a quick decision. The more the prospect questions the broker, the harder the broker will push. The broker has to make as many telephone calls each day as possible, so he can only afford a limited amount of time on the phone with each prospect. The broker's solution: Run prospects through an impersonal cattle call. Catch them on a hook and pull them in. This is not the kind of broker you want. Next week we'll look at the end of the pitch, which is where the broker fights to get your account.

The is a risk of trading in commodities, futures and options trading


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