“Alright guys,” said the freckled, boyishly chubby sales manager in the front of the boardroom. “The pay period ends at the close of business today. One more chance to put together a decent f*ckin’ month, one last chance to get some gross in for your check on the fifteenth.”
All eyes on him. You can hear the old time-stamping clock we used for trade tickets clicking away in the background, and that’s about it.
“So what’s it gonna be? You guys gonna be brokers or a bunch of f*cking pikers?”
This guy’s not nearly as intimidating as the Mountain of Misinformation was. He’s younger and weaker, and he’s made the cardinal mistake of going out drinking with the young guys on a regular basis. Once your brokers see you get grinded on by a stripper or watch you fall all over yourself at a happy hour, you’re pretty much done.
But this guy didn’t understand that. He thought access was his strength, the access that any of the brokers had to him, from the biggest producers to the smallest cold callers. Everybody’s buddy, the big-shot broker you could go to for anything. And he reveled in the adulation. That was his drug. We may not have feared him, but we respected him, and he was intoxicated by it. The brokers, predominantly male and in our early twenties, respected that he was driving a Benz two-door convertible. We also respected that every month—every pay period, I should say—he found a way to get over six figures in business done. He always found gross commissions to do no matter what.
“Now a lot of you are looking at me like I don’t understand,” he continued. “Like I don’t know what it’s like to be in down stocks and have clients to answer to.” He is pacing now, all blue shirt and white collar and yellow tie and spiked hair. “But believe me when I tell you, I have more down stocks and pissed-off clients than anyone in this room. And I guarantee you that by the close of business today, I’ll have another 15 in gross done to finish out the month.”
He definitely will, we all nod.
“And you know why? You know what the difference is between me and everyone else? I want it. I need it. I’m hungrier than everyone here, which is a f*cking embarrassment considering I already make more than every single person in this boardroom.” It’s not true, but the big producers who would normally object don’t have to sit through harangues like this; they are in their offices while their apprentice brokers (like me) are being lectured by Big Shot.
“Jimmy,” he shouts at a midlevel guy without even turning around to face us, “what business are we in?”
Jimmy replies as if by rote, “We’re in the moving business.”
Big Shot’s first syllable steps on the hem of Jimmy’s last: “Hear that, boys? We’re in the moving business, we ain’t in the storage business. You got a position not working out, today is when you sell it and you do that G. You write those tickets today no matter what, I don’t give a f*ck what story you need to tell.”
He pauses for emphasis, just like all those ugly sales books he’s read have taught him to do. “Now some of you guys are still looking at me like I don’t get it. Like I don’t understand how hard you pushed these positions on your clients and how great you’ve told them these stocks are. Ya know what? Too bad. You’re the broker, you’re calling the shots. The clients are paying you for your expertise, and you need to get that across on all your calls today, period.”
Audible gulps can be heard in the boardroom as the gears are turning and the kids in suits are already concocting excuses for why their clients need to make a commission-generating move today.
“This isn’t about what your client thinks, this is about what you say. The minute the client is dictating which stocks he holds and which stocks he sells, you lose. You’ve lost control of the relationship, and you might as well rip his posting page out of your book, it’s over, fellas.”
Today is going to suck. People are going to do things that their consciences tell them not to do as a sacrifice to the God of the April Pay Period. Lines will be crossed, bullsh*t will be spewed, and trades will be done that have absolutely no justification other than some broker’s overdue car payment.
“So listen up, guys. Go down and grab your coffees and smoke your butts and whatever else you need to do, ’cause when that opening bell rings, I want every one of you on the phones, smiling and dialing. And as an added incentive—and this is coming from the partners—the bottom producer this month is fired. The top three producers get his book of clients. Do yourself a favor and don’t be that loser who has to pack his sh*t and leave. Get on the phone and get some G done no matter what. Rock n’ roll.”
There is applause at the end of the meeting; no one dares to be caught not clapping it up with the rest of the monkeys. Papers are shuffled, Quotrons are booted up, and a half-dozen brokers head for the elevators to chain-smoke two or three cigarettes so they can make it through the morning. Maria Bartiromo is defending her personal space on the floor of the NYSE on TV screens around the football field–sized boardroom. The first handful of outbound calls can be heard as a few frightened rookies skip the chance to grab coffee and get right down to business.
And before long, you can hear phone receivers slammed down and see paper tickets flying into the trading room. High fives are exchanged, and guys who score big orders are writing the details on a massive dry erase board at the front of the room for all to see—part motivation, part shaming of the guys who haven’t gotten the job done yet.
The young men so diligently working to please Big Shot all have families at home. Moms and dads and grandparents and girlfriends who think that their precious David or Billy is a stock market professional. Instead, the prodigal son is pounding the phones out of a misplaced fear of failure, ruining his future career prospects in the process. He will be accumulating marks on his license and learning nothing useful about the market, all in the service of the pay-period grindstone he is chained to. He will be alienating every client he manages to talk into giving him a shot, hence the constant need to open new accounts and bring in new money. The old money’s been traded away or blown up in an unfortunately concentrated bet.
Oh well, get back on the phones.
Just so you know, the picture I’ve painted is straight out of the late 1990s, but you can still find this type of thing happening today. It is usually taking place in New Jersey, on Long Island, or down on Wall Street now that all the big firms have moved uptown. Only the brokers that need the validation and patina of prestige that comes from having a Wall Street address are actually still located there.
The thing you need to know about the brokers who call you up out of the blue is that they are essentially telling you casual lie after casual lie until even they have forgotten what’s real. The kid who calls you up and reminds you that “the last stock I brought to you was Netflix six months and 100 points ago” has repeated this falsehood on so many calls that by the time he gets you on the phone, he is almost convinced that he did. Listen to the conviction and the sincerity in his voice! It must be true! “OK, kid, I’ll play along. Whaddya got today?”
Large firms like Smith Barney and Merrill Lynch did so much cold calling and pitching over the phone that they literally got too big to do any more. They now have so many accounts that they’ve opened call centers to handle the overflow of clients.
A recent review on the employment site GlassDoor.com said this about working at a Merrill Lynch “call-center sweatshop”:
You will get burnt out after 6 to 12 months, the turnover is extremely high because people quickly realize they are being overworked, Long Hours, Unpaid Overtime, No real room for advancement, Constant change of goals which makes it hard to really determine how much you will make. Advice to Senior Management: Morale is low because you constantly change the goals and you are never satisfied. You know people are unsatisfied which is why you are constantly running new hire training classes every 3 months.
Merrill Lynch has rebranded its call centers under the Merrill Edge moniker. Like most wirehouse firms, Merrill has been moving its full-service brokerage operations “upstream.” It only allows those with $100,000 in assets or more to be assigned to a dedicated registered rep, and it considers the $250,000 account size and up its “sweet spot.” Any accounts smaller are handed off to the Merrill Edge steerage-class section. This philosophy of managing fewer accounts but of larger size is being adopted by brokerages all over the country; even the notoriously folksy regional player Edward Jones has announced an initiative of this sort.
These days, because the larger firms now have so many clients that they need to build call centers just to service them, cold calling has taken a backseat to client development (money raising from existing accounts) among the established players.
But, yes, the cold-calling small brokerage firms still exist even if they are dropping like flies. I got a postcard mailed to my house two years ago that literally scared the children. It featured the bald-headed, rabid-looking “CEO” of one of these firms pointing at me with the demand that I come down and “learn to be a million-dollar producer.” Maybe some other time, freak.
There’s another firm downtown with a football stadium–sized scoreboard that displays everybody’s gross commissions for the day in the middle of the office. How wonderful for the clients; I’m sure they’d be thrilled. No worries; most of them live thousands of miles away and will never have the privilege to see it.
There’s also a firm where the brokers’ chairs are taken away if they’re seen to be slacking or not “pitching hard enough” on the phone. I’m told by guys who’ve worked there that the doors are locked at lunchtime if there aren’t enough new accounts opened by noon each day. You’ll notice that these guys say the word accounts as opposed to clients. This dehumanizing makes it easier for the reps to churn them and treat the money as fodder for commissions. This is a military tactic that generals have used for a thousand years to desensitize the troops to the fact they were killing other human beings. It’s much easier to pull the trigger when facing “the Skinnies” or “the Gooks” or “the Towelheads” or “the Japs” rather than actual people.
One firm has its own Red Bull vending machine in the office so that its Jersey Shore-esque hired guns can keep themselves “pumped” all day. You’ll know the building by the cloud of cigarette smoke in front of it and all the guys in three-piece pinstriped suits crowded around the front. And if you walk by at the right time of day and meet the right broker standing there, you might even be offered your Series 7 books right on the spot—“Come up and pound the phones with us, buddy! We’ll train you to be a million-dollar producer!” Anyone who is willing to casually lie about his or her ability to outperform the markets can work there. You will not be asked about your education or background, only whether or not you have any felonies so the company doesn’t waste its time trying to license you. Old school does not even begin to describe the mentality.
Very few of these brokerages are left, now that paying 3 percent commissions is laughable to all but the most clueless investors. What low commissions couldn’t kill, the regulators have maimed; many cold-calling firms like Joseph Stevens and Gunn Allen have been fined out of existence for everything from aggressive sales practices to net capitalization violations. Shutting down a notorious boiler room for a technical accounting breach is a bit like putting Capone in Alcatraz for tax evasion, but the end result is the same. The few of these types of firms that still live have simply become the concentrated repository for all the brokers with nowhere left to go. They’ve gotten insanely good at playing the compliance game, doing and documenting everything to the letter of the law while pushing the envelope to the very edge. They have found that gap between illegality and amorality, and they are exploiting that gap on a daily basis. They own that gap and cannot be dislodged from it until the rules change. And then they’ll simply adapt again.
But just because you can do something, it doesn’t mean that you should. There are those in the brokerage business that will never comprehend this.
I used to look at my time among the brokers as time wasted, but now I know the truth. It turns out that my exposure to brokerage culture is a major asset to me now as I manage portfolios and investments. This is because I’ve received a crash course in reckless market behavior. For years I had front-row seats for the Olympic Games of investing stupidity. Without even realizing my good fortune, it turns out that I had learned exactly what not to do at a very young age, and I’ve made very good use of that knowledge ever since.