My colleague and Chartered Market Technician, Jared Coffin, pointed out an interesting piece of advertising this morning. We spend an inordinate of time discussing the trends in our industry. When commission-free trading was introduced by several large retail brokerages our risk antenna went on alert. And now this.
It seems our friends at Schwab are advertising fractional shares. In the advertisement below, they point out (as do I) that these "stock slices" are NOT a recommendation, offer or solicitation.
To my way of thinking, this is troublesome. Here are some questions that come to mind:
- The circle on the right looks a lot like a poker chip, doesn't it. What kind of message is that sending? Could it be misconstrued, albeit unintentionally, that you could "bet" as little as fifty dollars?
- If a person is interested in investing as little as $50, is a concentrated position in so few stocks a sound financial strategy? While I'm in favor of fractional shares and retail investor participation, does this lend itself to diversification, especially for a beginner?
- The financial industry doesn't just sell investors what they need, it sells them what they are already buying. While I'm a capitalist pig and want people to do what they want, could this also be a sign of saturation and peak optimism?
- If this isn't a recommendation, why use any corporate logos at all? Why not explain the concept and let its merits speak for itself? Or could it be the billions of advertising these specific companies spend helps us feel a level of comfort, familiarity and trust?
- Finally, what could possibly go wrong?
If you’d like to discuss your answers to these questions and more, click here.