Financial radio shows blur line between advice, marketing

Hosts pay stations for time allotments

Barry Armstrong’s morning show on WRKO has become very popular.

Every morning, Barry Armstrong delves into the day’s business news, offers financial tips, and interviews journalists during a WRKO radio show that has become so popular the station gives it two hours of airtime. What listeners might not know is Armstrong pays for the time and uses it to boost his Needham financial planning business.

Armstrong is one of a small cadre of financial advisers who host radio shows as a marketing platform and whose advertisements and sales tactics have run afoul of securities regulators. Over the past six months, Massachusetts Secretary of State William Galvin has taken action against two radio hosts hawking financial products — Armstrong and Charles “Chuck” Nilosek, a former WBZ radio host — for possible violations of state securities laws.

Armstrong denies any wrongdoing. Nilosek, who admitted breaking the law, paid the state $50,000 to settle the case.

“If they’re doing the things we allege they’re doing, it doesn’t matter if they’re on the air or not, these are violations of the securities law,” said Brian McNiff, a spokesman for Galvin’s office. “If they go rogue, they go rogue in a somewhat bigger way, because they have more access to people.”

Radio industry analysts say stations are increasingly turning to paid programming, particularly from the financial industry, because talk show audiences and advertising revenues are shrinking. Stations sell airtime for between $1,000 to $3,000 per hour in Boston, depending on the time, audience, and contract terms, according to analysts.

But these relationships, which can be profitable for the stations and hosts, can be confusing for listeners, muddying the line between news, entertainment, and advertising, said Perry Michael Simon, vice president and editor for news, talk, and sports on the radio trade website AllAccess.com.

Disclosures that the host is paying for the airtime — some Boston stations describe the shows as paid or sponsored programming — can be spotty, Simon said. The stations also don’t thoroughly vet financial products being sold, he said.

“They [financial advisers] buy the time in order to sell their services,” Simon said. “Radio stations tend not to be very well-equipped to investigate, nor do radio stations necessarily want to investigate as much as they want the check to clear.”

In the past decade, Massachusetts securities regulators have pursued cases against at least four financial advisers who used radio to build their businesses. Galvin filed a civil complaint against Armstrong in July, alleging the talk show host ran deceptive commercials during his WRKO program, “The Financial Exchange,” promising callers information about the warning signs of Alzheimer’s disease and how they can protect their assets.

Consumers taking up the offer received an Alzheimer’s fact sheet readily available through the National Institute on Aging and a phone call from marketers hired to pitch Armstrong’s financial planning services, according to the complaint.

“Armstrong pulled a ‘bait and switch’ falsely advertising one service to obtain contact information and switching it out for another — financial services,” the complaint said. Armstrong faces penalties of up to $25,000.

Armstrong said he ran the Alzheimer’s ad because an uncle died of the disease and consumers may be unprepared to cover the high costs of treatment. Only 73 Massachusetts listeners called for information, he said, and none became his clients.

Armstrong, who oversees $400 million in investments, said his show isn’t just a two-hour plug for his products. He described it as a well-regarded financial news broadcast in which journalists, including from The Boston Globe, come to talk about elections, the China economic crisis, and retirement planning.

“It’s a content-rich show,” Armstrong said.

In May, Galvin’s office filed a complaint against Nilosek, who operated a financial planning firm called Position Benefits. The complaint alleged that Nilosek ran advertisements on WBZ and other radio stations touting his experience interviewing celebrities and consumers on his show and promoting an investment that yielded 5 percent annual interest. Nilosek was not licensed as a financial adviser in the state and could not sell such products, the complaint said.

Nilosek did not pay for the commercials on WBZ, because his show aired on the station, according to Galvin. But he did pay to air his shows, “Road Map to Wealth,” which ran on weekends for several years, and “Life in Great! New England,” which was on-air until May.

Nilosek said in a statement that he was unaware he was selling a security and no client lost money. “I’ve settled this matter, but my life has been ruined,” Nilosek said in a statement. “I’ve paid dearly, but I am committed to moving on.”

Officials with CBS Radio Inc., which owns WBZ, said Nilosek’s show stopped airing after the allegations became public.

Phil Zachary, the Boston market manager for Entercom Communications Corp., the Pennsylvania broadcasting company that owns WRKO, said the station discloses paid programming once every hour on-air. He said he found nothing deceptive about Armstrong’s commercial and stands behind the show, which does well among the station’s core audience of adults over 50 years old.

“We’re very proud of the show. It’s easily as good as anything we could put on the air,” Zachary said. “The integrity of everyone who appears on our stations matters [and] we’re going to stand behind Barry.”

Other cases involving hosts of financial advice shows include Gregg Rennie, a Quincy financial adviser who appeared on several Greater Boston radio stations before he was sentenced in 2010 to seven years in prison for stealing $3 million from clients, including listeners of his “Your Money” show.

One of the best known cases centered on Bradford Bleidt, a financial planner who grew his business as one half of the “Money Couple” with appearances on the Boston Business Journal AM Edition and later bought the station on which it aired,WBIX-AM. Bleidt pleaded guilty in 2005 to running a $30 million Ponzi scheme, admitting he used his clients money it to purchase the radio station. He was sentenced to 11 years in prison.

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