Posted in Finance, Accounting and Economics Terms, Total Reads: 295
Definition: Blanket Recommendation
A blanket recommendation is a recommendation made by a financial institution or a broker to buy or sell a particular financial product or a stock without considering the investment goals of the client, his risk tolerance or his current portfolio of investments.
It is inappropriate to make blanket recommendations to a large group of investors as different investors will have different objectives and the same recommendation might not be suitable for everyone.
Example: Mr. Shareking has a large customer base of investors ranging from risk taking youths to risk averse retirees. Based on his research Mr. Shareking expects the value of the stock price of a company XYZ, an oil company, to go up in the coming months. So he sends a blanket recommendation to all his clients to buy the stock. As expected the share price of the company increases significantly.
Such a recommendation would not be suitable for risk averse retirees because if the price of the stock had gone down due to unexpected reasons, then they would have lost their savings which they had accumulated over the years.