the power of media endorsements

what they are

Why to professional investors appear on radio and TV shows?  Why do they give interviews to newspaper reporters?  After all, it takes time, they don’t get paid, the interviewer may be clueless and have his/her own agenda, and they give away information that they normally charge their clients for.  Nevertheless, professionals are eager to do so.

why appear in the media?

Ego is one reason, but that only goes so far.


The real reason is that most people have an unusually favorable view of the media.  They think that before you get to appear on a TV show about investing, you have to pass a rigorous screening process that weeds out all but the best and the brightest.  With retail clients in particular, the implied endorsement by the media can be a more important factor in their deciding to hire you as a manager than your experience and track record.

The reality is that a media appearance can simply be the result of a phone call by your public relations company, or the fact that you look good in a suit and can talk in sound bites, or that you can appear on short notice when a comment on your specialty is needed, or that your firm is a big advertiser.  So the appearance is actually more like a product placement in a movie than an independent evaluation of your competence.

Despite this, the sales materials for your products will doubtless feature your media appearance prominently  …because it works.



2 responses

  1. I am a journalist and this is totally not true. For national news the commentators are screened – we look for people who do know what they are talking about, there would be no point otherwise. We work on the assumption that a large financial institution will employ someone who is meant to have both deep experience and knowledge of what they are talking about.
    The only way of getting around this process is by offering up some insight that it interesting, new, different, news worthy. Journalists over their careers build up contacts books of people who they consider to be able to contribute effectively on a topic – it is that that they draw on when they look for commentators. If you are just starting in a job to trawl through the cuttings library and the internet looking for informed commentators for work that I do will actively screen and interview huge numbers of people weeding out the people who have no contribution to make and then going back to those who do.

    • Thanks for your comment. True, I may have gone overboard a bit in my post. Also, I should at least have pointed out that standards are considerably higher in places like the UK and Japan than in the US. After all, the Financial Times and the Economist are the best English-language investment publications available here. And I made the mistake of watching CNBC just before sitting down to write.
      Still, I find it curious that, especially for retail investors, an appearance on TV may be a bigger influence in their selecting an investment manager than the person’s track record.

      You may also have noted that the rating firm Morningstar is being sued by a group of retail investors who lost all their money when a hedge fund given five-stars by Morningstar turned out to be a Ponzi scheme. If the press reports are accurate, Morningstar’s defense is that its hedge fund ratings state that they are based on self-reported data by the hedge funds themselves, which Morningstar makes no efforts to verify. I’m not sure where to start on that one.

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