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Staying Alive

Sweating, you glance at your watch. Too exhausted to actually hang up the phone, it slips out of your clammy hand and falls to the floor. You've been making cold calls for six hours, and of the 168 names you've dialed, two are interested. Soon people are going to be eating dinner, something you haven't done before 10 p.m. in three weeks. You're nowhere close to your monthly production goal and you've

Sweating, you glance at your watch. Too exhausted to actually hang up the phone, it slips out of your clammy hand and falls to the floor. You've been making cold calls for six hours, and of the 168 names you've dialed, two are interested. Soon people are going to be eating dinner, something you haven't done before 10 p.m. in three weeks. You're nowhere close to your monthly production goal — and you've run out of family members to use as a last resort.

Such is the life of a broker fresh out of training, replete with ridiculous hours and those shooting pains in the lower back from sitting too much. It sucks. No wonder recruiters and training professionals estimate that only one of 10 new brokers who survive a firm's training program are still in the business three years later. Lately, the ratio isn't even that good. “When I left Morgan Stanley, out of my class of 184, there were like, 30 of us left, and that was after a year and a half,” says one Prudential broker who trained at Morgan Stanley.

The bear market hasn't helped new-broker success rates, that's for sure. The brokerage business has been suffering mightily, and while brokers have been spared the cost-cutting axe, it's been tough to ply the trade. The market is so unkind — much like the last really deep bear market in 1973 and 1974 — that few clients really want to hear from their brokers. Worse, the industry has one huge PR disaster on its hands with the Merrill Lynch conflict-of-interest fiasco. As a result, brokers' and their firms' reputations have suffered.

Even experienced producers are seeing their production decline, in some cases cut by 20 percent and more. (See cover story on page 26.) But they're not in the trouble that new reps are. Firms are devoting more resources to buying producers with established revenues, rather than throwing money at a decidedly less-than-sure thing making cold calls in the firm's bullpen. “The last couple of years have been so bad on new guys, they've dropped out at such an alarming rate,” says Terry Rutledge at Rick Peterson & Associates, a Houston-based recruiter.

Which means for a newbie, it's hard not to think of oneself as alone on an island, hunting for clients with a rock and slingshot. The most frequent concern among newer brokers is how to find clients, and this market, obviously, doesn't make it any easier. Of course, some figure it out, though, and what separates these brokers from those that fail isn't necessarily an idea that nobody else has thought of, but, more likely, a minor twist or a different way of handling a tried-and-true method — that and persistence.

Registered Rep. interviewed brokers at most of the major firms who have been in the business for less than four years and are having varying degrees of success.

Those brokers who have found success are saying that what works for them is minimizing the amount of work one has to do to get quality leads, rather than simply carpet-bombing an entire sixty-block radius with cold calling. Identifying prospects means a lot of things — neighborhood targeting, niche marketing to businesses, women, minorities or some other demographic, seminars with existing clients who bring refferals — anything to avoid simply dialing for dollars.

Ugh…Cold Calling

Of all the methods advisors use, there's not one that causes more fear and loathing than cold calling. A few isolated brokers love it — one Prudential broker says she spent her first couple years as a “cold calling machine,” simply playing the numbers game in order to build her business, and estimates 80 percent of her customers came from cold calls.

But many brokers hate it. And that's because of the frustratingly low success rate. Legislation is making cold calling more difficult to begin with — 28 states have some form of “do not call” legislation, and more states are expected to pass such laws. Meanwhile, caller ID means callers can more easily recognize a salesperson. One PaineWebber broker in the Midwest says his success rate among cold calls is about 5 percent to 6 percent, but “really, only about 1 percent of those people who are interested” have enough money to invest, he says.

In order to increase that success rate — or at least reduce the number of calls overall — this broker decided to target his efforts in a few ways. One method he's used successfully has been to keep abreast of sales of homes in the regions he's targeting. Then he sends introductory literature to the new homeowners, and then follows that up with a phone call.

Still others rely on lead generation services through their own firms or companies such as Larkspur Data. One Smith Barney broker who's been at it for six months says he's been successful using leads through fund distributors such as MFS or Putnam, which use lead generators. “If you get the leads from a mutual fund company, they have a vested interest in those working out,” he says.

Pounding the Pavement

There are a few other tried-and-true options brokers continue to use with varying degrees of success. Some complain that seminars have saturated the landscape already, although 29-year-old Stefan J. Contorno of Wachovia in Edison, N.J., says his greatest success with seminars involved “friend referral” seminars, where he gathered about 30 clients and asked each of them to bring a friend.

Joining associations and PTAs might still be wise. But some brokers say such a strategy is no longer yielding good results. As one 23-year-old Merrill broker put it, the “women's associations” are filled with 20 other women brokers, as are the chambers of commerce and other such local associations.

“The membership list of the airplane owner and pilots association has been around the block a couple of times,” says George Carpenter, director of content at, part of Pacifica Financial in Newport Beach, Calif. The recently launched Web site provides tips and commentary on building and servicing a book of clients.

Then there is the timing problem. You need to get paid now, but often it can take months to close a deal. And that's not easy when management is standing over you demanding that you meet your production goals — or else. “With some of the people interested in estate planning or something more complex, it takes two to three months to set up an appointment,” says the Merrill broker, who says he has to fulfill a goal of $24 million in assets in two years, or $1 million a month. “With that target per month, you don't have that kind of time,” he points out.

For that reason most of the brokers questioned say they aren't calling with stock ideas. None of the new reps interviewed even bother mentioning stocks. A few say they are calling potential clients to inquire about investing in municipal bonds, mutual funds or Treasury bonds — whatever, as long as it is safer than, say, a tech stock. In a bear market, the pitch should be the “your investing/planning process,” not the product, says the Merrill broker. “One of my first mistakes was calling on products.”

Most of the brokers interviewed say they're just trying to sell themselves. The business is never easy for new brokers, and it's gotten more difficult as the market malaise has continued. But it won't continue forever. There is one advantage that brokers have now: Most surveys say that retail investors have learned a lesson over the last couple of years; they're looking for good advice now, and no longer believe they can go it alone.

Making Cold Calls Warmer

With the exception of the few warriors who hunker down and make 100 to 200 calls a day, a lot of people despise making cold calls. Wachovia broker Stefan J. Contorno says, “Cold calling can be very tedious, and it is understandable how some might find it frustrating,” he says. “In essence it is a ‘numbers game.’”

But there are ways to focus your cold calls. One PaineWebber broker says he does a mailing to people who have recently moved into the neighborhood and follows that with calls; a Merrill broker says his success has come with speaking Spanish to Hispanic business owners and households. One Smith Barney broker, who works the phones constantly, says he's best on the phone just after closing a big account — “they can hear it in your voice,” he says.

Contorno says he's been targeting specific streets and specific neighborhoods for prospects. In Central New Jersey, an area with a number of blue-collar towns, he's had a reasonable success in wealthier areas of traditionally blue-collar towns, saying the clientele — meticulous savers not being targeted by other brokers — has yielded good results in building his business.

Meet, Greet, Eat

Seminars were the new thing a whole bunch of years ago, and the biggest problem with them is often the prohibitive cost — renting a hotel meeting room, food, etc. Sometimes the mutual fund wholesaler will kick in some money for these events, but a number of brokers complain that wholesalers are less likely to pay for seminars if they're simply starting out in the business — which means the broker will have to pay for seminars himself. Unless, of course, you can link up with a colleague. One J.P. Morgan broker says he dampened the seminar bill by piggybacking on a senior associates' seminars.

Wachovia's Stefan J. Contorno says his best success has been “bring-a-friend” type events, in which he asks his 20 or 30 clients to bring along a friend. Contorno has done this a few times and says he generates more leads than with the typical seminar. Meanwhile, Shelley Newman of Edward Jones (see page 83) says for her, the soft sell at seminars has worked best. “I don't take anybody's name or put anyone on a mailing list, and if they want to call me they'll call me,” she says.

Poaching Clients — Intelligently

Using the phone to hawk a stock sure as heck isn't going to do it anymore. One veteran A.G. Edwards broker uses the phone call to position himself as the clients' “savior” on the theory that it was likely their last broker that got them into trouble in the tech market. “These are the guys who sold them Global Crossing or Xerox,” he says. “They're too ashamed to call clients — the new broker starting out is not tainted.”

The best method? Many brokers interviewed say they had better success selling a portfolio review, mutual fund ideas, a 529 plan or fixed income investments. “Fixed income is an overlooked area,” says George Carpenter, director of content at “It's an area where a rookie looking to build their book is just crazy if he overlooks.”

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