Even with an advisor, it’s useful to understand financial markets and strategies, perhaps by at first investing small and diversifying your portfolio.
Many of Belfort’s victims trusted him and invested all their life savings in ‘guaranteed’ stocks. Especially for beginners to the stock market, it’s important to remain clear-headed about your investment decisions and do your own research. Key insights for investors Too good to be true: be your own investment expertĪs the saying goes if it sounds too good to be true, it probably is. Today, it’s still debatable whether financial professionals should be held to a fiduciary standard, requiring them to act in the best interest of a client, rather than simply providing a product. Belfort and his team are depicted as sales professionals, not financial ones, who are trained to sell investments at the expense of the client. Brokers seemed to focus on selling stocks and generating sales commissions, instead of advising clients on the financial risk of an investment or suitability for their portfolio. Rothschild in the 1980s, Belfort is quickly taught that a stockbroker’s only goal is to make money for himself. At its peak, the firm is said to have employed about 1,000 stockbrokers overseeing more than $1 billion worth of investments. Belfort’s firm was a type of boiler room, with a team that pressured investors to place their money into highly speculative securities. The influx of purchasing orders would rapidly inflate the price, assuring investors that the shares are showing bullish behaviour. Investors are then ‘cold called’ to convince them that these companies are potential stocks for investments. ‘Pump and Dump’ penny stock schemes are explained as the manipulation of the market through the accumulation of shares from penny stock or other companies, which are then stored in secret accounts. For example, a sudden large volume of purchase or sale could cause the price to drop by triple-digits in a single day.
These trade anywhere from a fraction of a cent to a few dollars, and because the market capitalization, stock price, and the daily volume of these stocks are quite low, they are highly vulnerable to manipulation. Penny stocks are low-priced stocks that do not trade on major stock exchanges and are issued by companies that typically do not publish financial statements. He is soon living the high life and becoming one of the major players on Wall Street, but soon discovers the dark side of success when he blurs ethical boundaries, quickly falling into a world of crime and corruption.įinancial concepts from the The Wolf of Wall Street film Penny stocks Jordan builds a business empire by presenting himself as a polished entrepreneur and training his employees on effective selling techniques. After discovering the higher commission on penny stocks, he establishes his own firm, Stratton Oakmont, where he sells penny and IPO stocks with speculative returns. After a major market decline, he loses his job and goes to work for a small business selling penny stocks. Directed by Martin Scorsese, the film starts with Belfort as an entry-level stockbroker at a Wall Street brokerage firm, where he is schooled on their cut-throat selling techniques.
The movie The Wolf of Wall Street follows one of Wall Street’s most infamous brokers, Jordan Belfort, who makes a fortune by defrauding investors out of millions. This black comedy shows Belfort’s rise to the high-life and excess of Wall Street, followed by a sharp fall involving crime and corruption – all while being seriously entertaining. The movie The Wolf of Wall Street is the true story of how rags-to-riches trader Jordan Belfort started with an OTC brokerage firm using pump and dump schemes, but eventually became a main player on Wall Street, where he launched the IPOs of several large companies. This article written by Marie POFF (ESSEC Business School, Global Bachelor of Business Administration, 2020) analyzes the The Wolf of Wall Street film. Entertainment media – such as films or books – are useful in this aspect as case studies they provide students with an organisational frame of reference to better understand both situational contexts, and importantly, the human dimension behind financial numbers. Instead, a contributing factor is that the teaching of finance and other business disciplines presents the challenge of linking theories and conceptual models to the “real world”. However, the ethical lapses often associated with finance are not always intentional.
Film analysis: The Wolf of Wall Street ForewardĪ pervasive moral stigma follows the financial sector, which has a dogged reputation for unethical and illegal behaviour.