Securities regulators are sounding the alarm about an increase in cross-selling activity by banks and investment firms that may harm investors.
In an investor alert issued Wednesday, the umbrella group of U.S. state and provincial securities regulators — the North American Securities Administrators Association (NASAA) — said cross-selling “is a growing concern.”
NASAA said that, while cross-selling can be mutually beneficial, there’s also a risk that the sales tactic can be used to take advantage of loyal clients.
“Financial services companies claim this is a fair and highly effective marketing strategy, simply informing the client of the products and programs available to them. However, aggressive cross-selling has been reported as misleading the client, particularly when the client is financially vulnerable, elderly or suffering from diminished capacity, or otherwise easily swayed by sales tactics,” it warned.
For instance, NASAA said there have been instances of senior clients being encouraged to sell their relatively safe deposit products in order to purchase riskier investments.
The alert detailed red flags of possibly abusive cross-selling, and encouraged investors to be skeptical and to do their own research.
“Cross-selling is a very common sales strategy and it’s emerging more into the banking and investment world. Investors may be easily swayed to invest in products not in their best interest,” the alert cautioned. “Look out for dubious sales pitches. Before making any financial decisions, ask questions, and do your homework.”