Video Resource: What Are Boiler Room Sales Tactics?
This Economist article “The Cockroaches of Finance” highlights trends indicating that “boiler room” financial outfits, employing high pressure sales tactics, still persist even after their heyday in the 1990s:
Boiler rooms trade on coercion and intimidation, and this one was no exception, say prosecutors. Victims were told that their conversations had been recorded and were legally binding agreements to buy, and that if they reneged they would face late fees and property liens. It is alleged that one even liquidated an annuity to hand over $250,000.
The heyday for boiler rooms was the dotcom boom of the 1990s, when Jordan Belfort, the “Wolf of Wall Street”, strutted his stuff. Today, online and e-mail-based fraud is seen as a bigger problem. But the steady stream of convictions suggests that old-style boilers remain common.
That immediately got me thinking about a 2000 movie “Boiler Room” that demonstrates the sales tactics utilized in operations like this. Here are two videos from that movie that your students will enjoy with questions for them to answer as they watch:
- What are the various tactics used by these brokers to sell stock (hint: there are many)?
- Why do you think they are successful? What psychological pressures are they employing?
- Why do these tactics continue to work? What human weaknesses are they taking advantage of?
- At some point, you will personally face aggressive sales tactics? How will you deal with them?
Want to protect your students from other financial pitfalls? Check out the NGPF Unit on Financial Pitfalls!
About the Author
Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.