Bank of America's Merrill Lynch to Ban Cold Calls by Trainee Brokers -- Update
25 May 2021 - 7:17AM
Dow Jones News
By Rachel Louise Ensign
Bank of America Corp.'s Merrill Lynch Wealth Management unit is
banning trainee brokers from making cold calls, a vestige of an era
when the industry pushed hot stocks on anyone who would pick up the
phone.
Merrill on Monday rolled out a revamped adviser-training program
that prohibits participants from cold calling and directs would-be
brokers to use internal referrals or LinkedIn messages to land
clients instead. The decision comes after the program's 3,000
trainees were told to stop outbound recruiting efforts to find new
customers last year after problematic phone calls.
The announcement formalizes a shift that executives have
signaled for months. "We are leaning much more heavily on leads and
referrals from the broader company," Merrill President Andy Sieg
said in April. "There is also an opportunity to be much more modern
in terms of the way we are reaching out to prospective
clients."
Merrill's training program, first established in 1945, was meant
to be the firm's pipeline for new advisers after it cut back on the
expensive practice of poaching from other firms. The pool of
candidates that starts off in the program, which pays a base salary
of $65,000 a year, is typically young and diverse. Participants who
fail to meet the goals are kicked out or moved to other roles in
the bank.
In recent years, only a small portion of trainees completed the
program. Successful recruits often had extensive personal networks
and were less reliant on cold calling, trainees said.
While cold calling offers the opportunity for a gifted
salesperson to build a network from scratch, it is hard to succeed
that way in an era when no one picks up. Personal referrals lead to
a response around 40% of the time, Merrill executives said, but
less than 2% of people who are cold called even answer the
phone.
The revamped program is intended to bring the firm's prospecting
techniques into the digital era and boost completion rates. It is
also another step in integrating Merrill's storied "thundering
herd" of financial advisers more closely into Bank of America,
which bought the brokerage in the depths of the financial
crisis.
The changes are also intended to make it easier for trainees
without an existing network to succeed. "We're going to open up the
possibility of a career in wealth management to a much broader
selection of individuals, " Mr. Sieg said on call with reporters
Monday.
Trainees will get more referrals from the bank's pool of 66
million retail customers, people familiar with the matter said.
They will also be encouraged to contact prospects over LinkedIn,
which has a higher hit rate than cold calling, they said.
Cold calling has been a mainstay of adviser-training programs
across the industry since their inception. As stock ownership
became widespread in the 1980s, brokerage firms hired droves of
young trainees to work the phones.
When Frank Maselli joined Dean Witter in 1983 as a rookie
broker, he was given a seat in a cavernous room filled with other
trainees where he made 1,000 calls a day from 8 a.m. to 9 p.m.
"I have a bond, I have it for two days, it might be gone
tomorrow," he would tell the strangers who picked up. About 1% of
the people he dialed would bite, a rate that was considered
successful, said Mr. Maselli, who now runs a firm that trains
advisers on sales techniques. After a few years, trainees developed
reliable clients and no longer had to cold call. Morgan Stanley
bought Dean Witter in 1997.
The advent of the national do-not-call registry in 2003 made
cold calls risky. Widespread caller identification, the decline of
landline phones and the proliferation of spam calls have since made
it even harder to get strangers on the phone. Before the pandemic,
in-person events such as seminars on investing were the best way to
land new clients, Mr. Maselli said.
But Merrill and other firms continued to embrace cold calling,
which senior advisers viewed as a rite of passage. Pre-pandemic,
Merrill expected trainees to reach out to at least 45 prospects a
week and hold meetings with six. Some current and former
participants said they were told to reach out to dozens more. Many
turned to purchased lists of phone numbers to meet the quotas.
By then, the pitch had changed. Merrill trainees were encouraged
to focus on investing goals rather than products. Would-be advisers
greeted prospects with phrases like: "We're in the process of
reviewing financial plans and would love to review yours," trainees
said. They were expected to bring in $12 million in assets by the
end of the 3 1/2 -year-long program. (The asset goals remain the
same in the revamped program, but it shortens to 18 months.)
The pandemic threw Merrill's adviser training into disarray.
Trainees started working from home, where they were cut off from
holding in-person meetings. They were encouraged to continue cold
calling, they said.
Some trainees called people on the do-not-call list, a Merrill
executive said in a memo earlier reported by Insider, which can
lead to regulatory penalties. In July, the bank told trainees to
stop prospecting for new business indefinitely.
Write to Rachel Louise Ensign at rachel.ensign@wsj.com
(END) Dow Jones Newswires
May 24, 2021 17:10 ET (21:10 GMT)
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