“Let me call you back.”And now, for the first time ever, the Straight-Line Pitch (also known as the Lehman Method) is in print.
What you are about to read is the infamous but never-before-published script that’s sold thousands of stock ideas and opened millions of retail brokerage accounts over the last 50 years. It has hundreds of authors; it had been reshaped and reworked by several generations before it reached my desk in the 1990s. At its core, it has changed remarkably little considering it has faced the dawn of the information age with the advent of computers and the Internet. Its use continues even now in the era of wireless phones, text messaging, e-mail, and all the other innovations that have changed the world over the decades. The brokers say that pitching new investors is “a numbers game.” One out of ten qualified investors will open a new account when a broker uses this pitch—then and now—so why should it have to change?
I wrestled for a while with the decision of being the first person to publish something that has been so clandestine and fundamental to the brokerage business for so long. Then I came to the conclusion that someone had to do it and it may as well be me. Right now there are 4,500 brokerage firms in the United States with roughly 163,000 branch offices and more than 630,000 registered reps. Excluding the dually registered advisors, the brokers who work in bank branches, and those who serve institutional investors, these reps are likely using some variation of the Straight Line Pitch even if they don’t realize it.
You know the lines …
“Stretch with me this one time, and I’ll never have to ask you to stretch ever again.”
“You’ll be smiling from ear to ear.”
“You’ll be laughing all the way to the bank.”
“This trade will be the cornerstone of a 20-year relationship.”
“This will be the best decision you’ve made all year.”
“The only problem you’ll have is that you didn’t know me well enough to buy more.”
“Let the results convince you that you’ve made the right decision.”
“Let me take you under my wing, and I have a funny feeling that some of your other accounts will find a home here with me as well.”
The Straight Line is impulse selling at its most aggressive, and there have been hundreds of thousands schooled and steeped in its traditions over the years. Since its beginnings in the Water Street and Madison Avenue branches of Shearson Lehman, the Straight Line has been taught and retaught a million times during countless boardroom meetings and brokerage firm training sessions. Like most potent weapons, some have used this pitch for good and some for evil. It has been used to begin relationships between dedicated brokers and clients that have lasted decades. It has also been used by churn artists and those selling over-the-counter “house stocks” complete with fraudulent markups built into the prices. Just as nuclear power can be used to heat homes or to make whole cities disappear, so too can the Straight Line connect an investor with both good brokers and bad ones.
With the mass migration toward the more holistic and client-focused investment advisory model, those who had initially built their businesses on selling product have since dropped this pitch from their repertoire. There is still, however, a small core of brokers who are consistently “cracking new accounts” using this method. But these days, the vast majority of new clients they’re bringing in with this old-school rap are in some of the most remote areas of the country. It’s not that the rural folks have any less common sense than their more cosmopolitan counterparts on whom this doesn’t work anymore; it’s just that they’ve heard it less and so are still susceptible.
Almost anyone who’s ever gotten a cold call from a broker can jokingly recite snippets of this pitch. Its phrases and topics and lines come from a host of different selling books, Shafiroff’s included, but they’ve been molded and modified and stripped down and embellished over the years based on that original framework. No one’s ever seen the whole thing in print before, the way it’s been handed down from broker to broker. Until now.
Before we get into the specific closes and rebuttals of the pitch, I’ll first lay out the methodology and the structure of the Straight Line. The way it’s been taught traditionally is as follows:
Picture yourself chasing a prospective customer down a hallway (I kid you not; this is how it’s explained). All along the hallway are doors on each side. Each of these doors is an excuse for why the prospect can’t buy the stock today—no money, no time to talk, can’t decide without doing his own research, needs to consult a wife or business partner, etc. At the very end of the hall is the only door you want him to go through—the “yes” door. Your job is to chase the prospect down the hallway during the course of the call and slam each of those “excuse” doors shut as he attempts to escape through them.
Each time a prospect makes an excuse for why he can’t buy, the broker using the straight line is to use one of four rebuttals to put that argument to bed. When the prospect switches his reason for not being able to buy, he has invalidated both of these excuses and any that come after it; at this point the broker has the prospect “on the run.”
As sickening as this all is, there is some logic to it. Imagine you call a friend to go to the movies with you, and he tells you he has to be somewhere at 6 p.m. so he can’t. Now imagine that you rebut that excuse by informing him the movie is only 87 minutes long, which leaves him plenty of time. If he then says that he can’t go because he isn’t feeling well, he has just put himself on the run; all his reasons for not being able to go are lies, and it is up to you to discover the “real” reason. By the same token, when a prospect first says he can’t buy a stock because he isn’t liquid enough and then says he can only buy if he has some time to do some homework, he is telling you that neither reason is the real one in terms of why he isn’t buying.
The well-trained broker is actually thrilled to hear the prospect make these excuses, especially when the prospect dances from one to the next. Each door slammed shut brings the prospect closer to either hanging up or agreeing to the trade. Brokers are armed with enough ammunition to never have to hang up before the prospect relents or clicks the phone down. The conversation may veer off into many different directions, but the broker is trained to bring it back onto the path toward a close, the origin of the Straight Line’s nomenclature. The structure is as follows:
The introduction: “Hi Bill, this is Alex Stevenson from Rocky & Bullwinkle Securities. How are you? Great to hear!”
Notice how the broker addresses the prospect by his first name. This is to engender a sense of familiarity over the phone. The broker is also informing you that he is on your level, a peer, and not one of your employees who calls you Mr. Smith.
Introduction continued: “You were recently contacted by a member of my staff in reference to the stock market. At the time we promised only to contact you with a trading idea that we felt had truly explosive potential. If you have a pen handy, I’d like to give you the ticker symbol and have you take down some brief notes. Let me know when you’re ready …”
The trap is baited. If there is resistance at this point, the broker will throw out an example of the last idea he was bringing to investors that doubled or tripled in value. Keep in mind that these lines are delivered with a gargantuan amount of conviction and sincerity. On paper they hardly compare to what they sound like when delivered by tough-sounding New York brokers oozing with confidence and market-beating bravado over the phone.
Assuming the client assents to being pitched, the broker then launches into a three-part presentation of the stock idea he is selling; let’s call it Acme Bowling Ball Co. (ticker ABC):
Compare sells: “Last month similar company XYZ traded from 5 to 50 based on ___!”
Fundamentals: “Acme Bowling is earning ___ and trading at only ___ times cash flow!”
Catalyst: “Everything I’ve told you is already known by the pros, but wait ’til you hear this!”
By the time this catalyst is delivered; the broker has made the case for why the stock must be bought right now. This is followed by a few questions that were designed to get the prospect in “yes mode,” like:
“Do we agree that owning undervalued companies such as Acme Bowling before everyone else discovers them is the key to making money in the market?”
At this point, the broker will close for the first time (of many). He will propose a trade to the prospect in the amount of $50,000 or $100,000 worth of ABC, “just to get the relationship started.” He does not expect to get an order of this size; the purpose of asking for something so ridiculous is both to give himself room to come down on the share amount in future closes and to avoid looking like a little piker. Brokers are trained to expect a no to this first close and to relish it. “Every no gets me closer to a yes,” we are all told in those godawful Zig Ziglar books.
Once the prospect says no to the trade for the first time, the actual sale has begun. The broker next gets the prospect to admit, out loud, that although he can’t do the trade because of reason X, he at least agrees that the stock is going to trade higher. Once the client agrees that the trade itself is a winner, then it becomes a matter of convincing him that the trade needs to be done right now.
At this point, the broker will alternate between addressing specific objections and segueing into different “power closes,” each of which ends with the broker asking for the order one more time. The broker is armed with three to five rebuttals to combat each of the typical objections he will encounter. Objections include:
“I don’t like the market right now.”
“I’m not liquid right now.”
“I’ve been burned by other brokers before.”
“I’d like to watch this recommendation first.”
“Send me some information on the stock or your firm.”
“Let me think about it first.”
“Let me speak to my wife about this.”
The broker is taught that each of these objections is false; they are merely ways for the prospect to stall for time. The Straight Line says that all these objections must be overcome until the one true objection—the fact that the prospect doesn’t know you—can be addressed.
This objection–rebuttal–power close sequence is repeated until the prospect relents or hangs up the phone. The call can last 10 minutes or 2 hours. The well-trained broker can use the Straight Line to bring a stray prospect back from any tangent he tries to take the conversation in.
There are prospects who want to buy from the outset but also want to be romanced a bit. There are prospects who truly don’t feel comfortable but after 15 minutes of smooth talking are lulled into a sense of familiarity with that voice on the other end of the phone. There are prospects who give everyone a shot regardless of the idea, and then there are those who will never open an account and simply love talking to salespeople. I’ve seen brokers open accounts with people who were on a cell phone at the airport or standing outside a child’s birthday party. Prospects open accounts for a variety of reasons, but the sexiness of being courted by a hotshot broker has almost always been a part of the equation. We were taught that it’s the sizzle that sells in a steakhouse, not the meat itself. Now you understand why so many brokers will only pitch men, despite the high percentage of households in which women call the financial shots.
Now that we’ve covered the philosophy of the pitch, here are the rebuttals and power closes themselves, for the first time ever. I’ve cleaned up some of the grammar (many brokers are notoriously borderline illiterate), but these are substantially the same texts and scripts that have been secretly handed down from senior to junior broker for decades.
The broker trainee is taught that unless the prospect’s house is on fire, there’s no reason why the call shouldn’t proceed.
“___, I’ll give you my 800 number and my fax number. I’ll even give you my cell phone and home numbers if you want. But the truth is, you will never call me back.
“It’s not because you don’t like the idea, but because you have other things to worry about: a business, a life, and more important things than getting back to me, no matter how good my idea is.
“You’ll put the idea in the back of your mind and forget about it. Because again, you have other things to worry about.
“___, let me do the worrying for you.
“Give me the same opportunity that you gave your current brokers, a chance to show you what I could do for you.”
“I wouldn’t be surprised if, as we’re speaking, your secretary is putting a note under your nose. Or you have two people on hold, and another person is waiting outside your office to see you.
“And I also know that the decision to buy this idea or not will not change your life, or for that matter have an impact on the way you live.
“But ___, by having an account here with two of the equity owners and me, I truly feel that this will be the best relationship you will ever have in the market.”
“___, you’ve already agreed that the idea makes sense, and I’m certain you see that based on these pending announcements, the stock should trade higher.
“However, I think emotionally you can’t make the commitment now, am I right?
“___, when do you think most mistakes are made, when people act logically or emotionally?
(“Emotionally”)
“Exactly!
“Let’s not be emotional!
“Let’s be logical!”
“___, I understand you’d prefer to call me back, but let me ask you a question.
“What more are you going to know tomorrow that you don’t know already?
“Please ask the questions now. I’ll stay on the phone with you until you are satisfied!
“I know that someone as busy as you are will be difficult to get back on the phone with. I don’t want to miss this opportunity!
“As you know, ___ currently has a strong buy and is moving its institutional clients into ___ as we speak!”
One of the first lessons the broker-trainee is taught is that the broader market doesn’t matter so long as your individual stock selection is good. Of course, once you actually do the research, you learn that, in fact, actually the opposite is true; most of a stock’s performance can be attributed to the action in its sector and then the overall market.
“___, I understand that you are concerned about the overall market. I wouldn’t invest in the broader market right now either.
“However, the state of the market is always relative. I mean, I’m not asking you to buy an index fund on the S&P, am I?
“Of course not!
“I’m asking you to give me a shot on a small trade in an individual, special situation … one that looks to trade higher regardless of what happens with the Dow Jones Industrial Average!”
“Let me read you a quote from one of the most successful money managers of our time, Sir John Templeton:
You must do something different from the majority. The time of maximum pessimism is the time to sell! Therefore, the only way to find bargains is to buy what most people are selling. Profit is made by focusing on value, not outlooks or trends.
“We have been speaking about optimum value, in both the company we’re buying and the relationship we’re entering.”
“___, I understand that right now you don’t like the market, but with all due respect, what do you do for a living?
“OK, so you seem to be good at what you do. You know your business, right?
“Well, I know mine!
“I eat, sleep, and breathe this business. I do this 7 days a week and work 12- to 14-hour days. I also happen to work alongside some of the sharpest, most insightful people in the business.
“Establishing an account with me right now gives you the opportunity to benefit from their experience as well as my own.
“Believe me when I say, we know what we’re doing in any market conditions.”
“___, the state of the market is always relative. I wouldn’t invest in the broad market averages.
“We’re not investing in the market … we’re investing in an individual, special situation that, relative to the market, should be bought at this level.
“___, big money is made during bad markets, not great markets. I’m not smart enough, nor is anyone on Wall Street smart enough, to pinpoint a bottom. One thing I can tell you, however, is that this is certainly not the top.
“___, when nobody will touch them, then I’ll be all over them. When the market is high and sexy, everyone’s buying. That’s when I’ll be selling our stock to them … at much higher prices!”
“___, the dynamics of the market never change. For a hundred years clients have been telling their brokers yes or no.
“In 1966, McDonald’s was a new issue at $22 a share. An investment of just $20,000 would now be worth over $20 million!
“We both know that on that day in 1966, some clients told their brokers they weren’t looking to do anything that day, or they never heard of McDonald’s, or they just didn’t like the market in general.
“The world is made up of two types of people: those who seize opportunity and those who walk through life without a clue.
“No one becomes as successful as you or me without realizing that fact.”
Broker-trainees are taught to help the prospect “find the money” at all costs, even if that means not only persuading someone to buy a stock but also convincing him to sell something else he owns on the same call.
“___, I understand that you’re not feeling as liquid as you’d like to be. I hear that a lot from my clients. But what I find out afterward is what they’re really saying is that they are just not as liquid as they might normally be.
“If you were a client of mine for three years and I already had most of your assets under management and was now asking for you to add another quarter of a million, that would be one thing.
“But that’s hardly the case here, am I right?
“What I am asking you to do is take ___, probably less than 1 percent of your total assets, and extend to me the same courtesy that you gave to that other broker that’s managing the bulk of your money, the one shot.
“Besides, for someone like you, I know that ___ is not a question of yes or no, of whether or not you can do it. It’s more a matter of which account to write the check on.
“Am I right?”
“___, I can appreciate the fact that you weren’t waiting for a phone call from me with your checkbook open, but liquidity is a very relative statement.
“Let me explain.
“Sometimes if I have a client that usually puts $100,000 into an idea and today he only has $25,000, he doesn’t feel liquid. Or one of my big boys that put a million into each and every idea only has $200,000, he also doesn’t feel liquid.
“And what I’m getting at is that liquidity right now is completely irrelevant. You and I are going to start real small, on a dollar figure that is insignificant to you—something I know you can handle.”
“___, I sense you’re being very sincere, and I appreciate that.
“However, I take what I do very seriously. I’m never going to call you when I think you’re sitting on the most cash or when I can make the most commission for myself, but only when I have a stock that I believe goes much higher in the short term.
“The amount of this investment is much less important than you seeing our approach.
“The reason for this call is to give you the advantage of our timing.
“___, buying ___ may seem like a big decision, but really, I’m just asking you to take a small step and I will do the rest.”
“___, if you’re not liquid for 5 or 10 thousand right this second, that’s OK. I don’t always have 10 grand lying around my office either!
“What’s your favorite sport?
“Imagine yourself the manager of your local ___ team. You have just been offered the chance to take on ___, but it means you will have to let go of a mediocre player.
“Would you make the change?
“Of course!
“That’s exactly what I’m asking you to do here. Look at the stocks you own right now. I know some of them are down for the count.
“Take a gun and shoot the wounded!
“Redirect the assets into something that you have already agreed makes sense.”
We were taught that this is the only true objection and the one that all the others actually boil down to—the simple fact that the prospect doesn’t know us and that there are so many horror stories out there. These rebuttals are delivered in a manufactured tone of sincerity and often involve the broker climbing under his desk so that the frenetic background noise of the selling floor around him will be muted.
“___, I can certainly appreciate the fact that you’ve had a bad experience before, and I realize that you may not be familiar with exactly who we are.
“Quite frankly, the reason is that we don’t advertise during the Super Bowl. Our reputation has been built on word of mouth and personal service.
“What you need to know right off the bat is that ______ is one of the largest independent money management houses on The Street. We have several offices and branches across the country.
“My place of business is the corporate headquarters in Manhattan, literally surrounded by every major investment bank, hedge fund, and brokerage firm that you’ve ever heard of.
“___, you are familiar with (well-known clearing firm name) I’m sure, correct? That’s my bank clearing agent. Your checks are made payable to them, and your account is insured for up to ______ dollars.
“Before you send a dime anywhere, whether it’s our first transaction or our hundredth transaction, you will always receive standard confirmations from a well-known clearing company, which, by the way, manages about $5 trillion for investors worldwide.”
“___, I can understand that you’ve been burned before. It happens, unfortunately, and I’ll tell you why:
“People get burned because they buy things they don’t know about.
“Now if I got on the phone with you and started yelling and screaming about some nonsense penny stock, do you know what you’re supposed to tell me?
“You’re supposed to tell me to get lost!
“I’m not doing that. I’m asking you to buy one of the most undervalued companies in the market. With ___ in revenue and contracts with companies like ___ and “___, I’m sure you can see the difference, am I right?
“Of course you do!”
“___, here’s the problem that I find so often. It’s education! Obviously, you’re not in the brokerage business. Let me ask you a question. Just out of curiosity, what business are you in? Well, when it comes to that business, I’m sure you probably know all the quality players and all the low-end players. So when you make a decision on whom you want to work with, for the most part you’re making an educated decision, am I right?
“Unfortunately though, on Wall Street, you have these very aggressive young men getting into this business without any education or previous business experience. They go to small over-the-counter firms and call you on the phone with whatever stock they are told to push at that time. They bring you some fascinating story that may sound very exciting, maybe they push your greed buttons by telling you that you’re going to make 1,000 percent on your money in a month. But the end result is that you are getting pie in the sky.
“But coming from the ___ industry, you don’t know if they provide quality or not. So what happens? Because they may sound very good, you end up putting your trust in them and getting killed. My biggest problem in the last ___ years hasn’t been making my clients money, it’s been trying to keep them from losing money in positions just like that. And that’s exactly what I’m trying to prevent you from ever doing again by stopping the buck here.
“Understand something, ___. The dollar amount we work with is of no consequence. You tell me what makes you feel comfortable, and that’s what we’ll do. But one thing I will assure you of. By the end of the year, after you see the performance of ___, and you see the level of professionalism I provide all my clients, you’re going to say, ‘Thank God, I’ve finally found a broker I can rely on!’
“All my clients have said that at one point or another. Then you’ll reflect back to this day and realize that you just made the smartest business decision you ever made in the market.
“___, I have one shot and only one shot to make a first impression. And believe me, I’ve done my homework. Give me the shot this one time and believe in me. I’m not going to let you down.”
“I understand why you feel the way that you do. And I know you’ve heard horror stories about people having bad experiences over the phone with independent firms.
“However, ___, there are major differences between those firms and mine.
“Those firms will open the account with you on a NYSE company that is a well-known name like Home Depot or Toys ‘R’ Us.
“Then they come to you with a $5 IPO—give you a small piece but make you commit to buying 10 times the amount of stock in the aftermarket—usually you’re buying that additional stock between 12 and 15! At the end of the day, the IPO company is raising more money than it’s doing in revenues! The stock opens at 15, and six months later it’s at 2 bucks a share and the broker stops taking your phone calls.
“My firm specializes in small- and mid-cap stocks, typically profitable companies trading on both the NASDAQ and NYSE. We don’t underwrite IPOs, and we only bring investment banking deals that are being spearheaded by the major firms. Our lack of in-house bankers guarantees you the protection against conflicts of interest that have become so prevalent on The Street.
“In addition, nothing we ever come to you with will ever have my firm as a market maker. We hold zero inventory in stocks and use every trading skill at our disposal to obtain the best possible prices for clients on the open market.”
As more investors began using the Internet, this response became more and more common. The broker-trainee was taught to emphasize the “relationship” as opposed to the eventual performance of the stock, thus negating any of the benefits of watching a recommended trade.
“I can appreciate the fact that you want to watch the stock, and I’m flattered that you would take the time to track one of my recommendations that you don’t even have a vested interest in.
“However, I’m sure you’ve seen all those mutual fund commercials that say ‘past performance doesn’t guarantee future results.’
“Am I right?
“___, when I am dead right on this idea, that will not necessarily mean that you’ll jump into my next idea blind, am I right?
“Of course you wouldn’t.
“You will need to judge each of my recommendations on their own merit, not on the performance of the recommendation that came directly before it!
“And you yourself said that this idea made sense and that you see the opportunity to make money here!”
“___, can I say one thing?
“Watching this stock go from A to Z is a worthless academic exercise. Nobody has ever made money watching stocks. It only allows me to say I told you so, and that’s not my style!
“Mr. ___, we both know that the only thing that will establish a track record for me is a buy confirmation on your desk at ___, and more importantly, a sell confirmation down the road at ___.
“Wouldn’t you agree?
“Of course!”
“___, you’re right. You don’t have to buy ___ today. Let’s say you open the Journal three months from now and you see the stock trading higher, substantially higher.
“You’re not going to cry because you could have made 5 to 10 thousand on the trade. However, what you will realize is that you lost a broker who knows what the hell he’s doing.
“The law of averages says that you have to sift through 100 brokers before you find the one who makes you money on a consistent basis.
“If you knew whom you were talking to, I mean really knew, you’d be buying size right now!
“But I understand that’s not the case. I have to do my job, which is basically two main tasks:
“I have to make you money. With this idea, I think that’s the easy part.
“I have to make you feel comfortable. That’s a little more difficult.
“The size of the trade is unimportant to me. Whether you own 100 shares or 10,000 shares, when the stock goes from ___ to ___, you’re going to ring the register.
“I’m not asking you to dive in headfirst, just dip your toe in the water and get your feet wet.”
“___, how many calls from brokers do you get per week?
“So that means that you hear about ___ new ideas every week. Do you think that you really have the time to follow stocks that you do not even own in your own portfolio?
(Yes)
“So you follow every stock that is given to you by a broker, and then first keep track of your own holdings? I doubt it!
“It’s hard enough to manage your own accounts, you certainly don’t have the luxury of worrying about an invisible portfolio of stocks that you don’t even own!
“What I am saying is, let me do the worrying for you!
“Besides, for someone like you, 500 or 1,000 shares is almost like watching it! However, it does allow me to get the information on us out to you, and it lets you receive a monthly statement from ___, my bank clearing agent.
“It also allows you to enjoy the ride in a small way!”
“___, I know that one’s initial reaction is to want to watch the first idea, and if it goes higher, try the next one. But I think we’re missing the point of what I am really trying to do.
“Let me explain:
“Have you ever bet on a football game or any other sporting event?
(“No”)
“Have you ever put a friendly wager on anything in your life?
(“Yes”)
“I bet you watched it a lot closer when you had at least something riding on it, right?
“That’s exactly what I’m asking you to do here. Put a little something behind ___!
“Establish an account here with us. Allow us to get you out the monthly statement and showcase our talents, let us show you the professionalism we provide.
“Take a chance on ___!
“I won’t let you down.”
This objection has morphed from mail me some research to fax it to e-mail it or let me look it up myself on the Internet. In any of those cases, the broker’s response zeroes in on how dated anything in print is and how anything that can be mailed out has already been baked into the price of the investment.
“___, I can appreciate the fact that you want to see something in black and white. Maybe if someone called me today with an idea, I’d react the same way.
“But let me say this to you … I have a lot of information on ___. I am looking at a file sitting on my desk that must be about 6 inches thick.
“You see, ____, we’ve already done our homework on ___.
“The money managers and analysts that I work with have met with the company and its entire management team.
“We have sat in on every conference call and attended every road show and conference appearance that ___ has made over the past few weeks.
“We have a research staff that has ripped apart the company’s balance sheet and income statement and examined every fundamental and technical factor there is.
“The real difference here is that we are not a supermarket of stocks. We only make a select amount of recommendations a year, so when I bring you a situation, it will only be something we know firsthand.
“As I mentioned earlier, we are expecting major announcements on the company shortly, and if I thought the best time to buy the stock was two days from now, believe me, I would have waited two days before I called you.”
“___, I understand you want to see some information. Let me ask you a question. What exactly do you want to see?
“An S&P report?
“A chat room on the Internet?
“With all due respect, I know there is a lot of information out there and I know that you’re a savvy investor, but there is a lot more to this recommendation than anything that might catch your eye in one of these reports.
“If it were that easy to make money in the market, then I’d be out of the job and everyone would be rich, including the secretaries that type the reports!
“Am I right?
“Exactly!
“My firm spends enormous amounts of time and money on these ideas, and I know that our relationship is going to hinge on the success and accuracy of our research on this situation today.”
“I can understand why you want to see information, and I can send you anything that you need. But that’s not how you make money in the market.
“You could look at earnings.
“You could look at assets, the balance sheet, all of which are important.
“But they all disclose a company’s past performance.
“Now in the past when I’ve taken a company with good earnings and a strong balance sheet, I’ve made my clients money.
“But when I’ve timed it with a major near-term event, I’ve made them a fortune!
“___, you have to agree that a major contract announcement combined with a buy recommendation from a wirehouse firm could only drive the stock higher, right?
“Well, we think you’ll see this any day now.”
“I can appreciate the fact that you’d rather see the information first, before making a decision. But I’m sure you agree with me that showing you glowing reports and a buy recommendation from ___ does not guarantee that you will make money on this idea.
“Am I correct?
“Exactly!
“The only thing that will make you money here is my timing, and believe me, there is a definite timeliness to this call.
“If just one of the major announcements we’re looking for gets out over the tickertape, you and I are paying a lot higher for the stock.”
This was one of the hardest objections to overcome, as everyone’s time to think things over is quantitatively different. Broker-trainees became proficient in stressing the urgency of the situation in order to make the act of thinking things over out of the question.
“___, I can see why you’d want to think it over before making a decision, but also you and I both know that the best time to make a decision is when you have all the facts fresh in your mind, am I right?
“I have just gone over a very thorough presentation in which you yourself agreed that the idea makes sense and the stock should trade much higher. I don’t care about the size of our first transaction. I only care about the timing.
“I would rather see you own ___ shares right now at this price than maybe 5 or 10 thousand shares tomorrow or next week at a higher price!
“And if there’s even just one question that I can’t answer for you on ___, then I don’t even want you to own a stitch of stock.”
“___, it seems that your reaction is a very common reaction with my newer accounts and referrals. I mean, let’s face it: we’ve been following ___ for 6 months, and you’ve only heard of it for maybe 60 seconds.
“But this is the same type of conversation that we had with many newer accounts on an earlier recommendation of a company called ___.
“We gave this recommendation to all the new accounts and referrals here at the firm, and aside from being a great company, in less than ___ weeks, it released blockbuster news to The Street, and we rode the stock from ___ to ___!
“Our clients that made a decision based on our timing made a small fortune, while those that chose to think about it missed out!
“As I mentioned earlier, we are expecting two major announcements any day.”
“___, I can appreciate the fact that you want to think about it. We don’t make quick decisions either. But would you agree with me that price and timing are both critical factors when making an investment?
“Of course they are!
“We know our business, and our performance is simply the credential on The Street.
“___, we are bringing you an opportunity, not history, and I am concerned because you must realize that you can’t check the kind of advice that we are going to give you.
“By the time you are reading about this on the front page of the Journal, we both know it’s too late.”
“___, I know that you would feel more comfortable if we had the luxury of thinking about ___ for the next couple of days. And you know what? Maybe ___ even stays at a buying level for another three or four days.
“But what’s really important here is showing you a true level of professionalism.
“We only come to you when we have something that we feel is truly exceptional. You don’t want to get back to me … you want to make real money!
“Under these circumstances, the decision to buy should not be postponed. You should own ___ at the same time as our institutional clients.”
“Do you want to know why you’re saying not today? Because you can’t think of a better reason not to own this company. I sound too good, and the scenario makes too much sense. On top of that, you’re not in the mood to buy stock.
“Unfortunately, some of the best opportunities come along when you’re not in the mood. I don’t call my clients when their bank accounts are the fullest or when I can earn the most commission for myself or for that matter when they’re in the mood to buy stock. I come to them when I believe I have a security that trades higher in the near term.
“Six months from now you’ll be in a good mood, a buying mood. You may even be more liquid than you are today. Some 22-year-old kid reading from a script, from one of the wirehouses, will sell you with some crazy, sexy, exciting story. You’ll be in a buying mood, and you’ll buy the stock. You know what? You’ll lose your money.
“Give me the one shot, it’s the right thing to do.”
“___, you know what? Right now what you’re saying is a very common reaction for the small investor.
“Institutions, on the other hand, do not work this way.
“What I mean is you’re never going to bring a top fund manager a compelling situation where you both agree that the idea is exceptionally undervalued and have him say to you, ‘I’ll wait until next year,’ or ‘call me after tax season.’
“Top fund managers understand the fact that good situations do not always present themselves when it is most convenient.
“That’s why it is usually so difficult for the small investor to keep up with the institutions in the market and see comparable results on a consistent basis.”
The dreaded “let me talk to my wife” objection was where the implied chauvinism of the average broker really got its moment to shine and become a bit more overt. While the rebuttals were worded with some civility, they were delivered in the most mocking and emasculating tone that could be employed without going over the line.
“I understand why you would want to check with your wife. I have to respect a man who respects his wife. It’s probably the reason why I’ve been with my wife for so long.
“However, as a businessman, which you obviously are, you must make a lot of important decisions everyday, correct?
“Decisions that I’m sure you couldn’t or wouldn’t consult your wife on! And she’s OK with that because she trusts your judgment, right?
“Now if this call was about buying a large piece of property or taking a million-dollar position in a stock, that would be one thing. But we’re not talking about anything as substantial as that, are we?
“What we are talking about, I mean really talking about, is establishing a relationship with someone that you can trust.
“And besides, ___, I know from experience that it’s probably a lot easier to beg for forgiveness than it is to ask for permission!”
“___, I know you’d rather speak to your wife, and believe me, I want you to feel comfortable as well.
“But I know from experience that your wife will feel much more comfortable when you show her the FedEx package that comes to your home after you purchase the stock.
“In it will be a full dossier on ___, as well as a complete profile on me and on the firm. In addition, it will have account information from ___, the largest clearing firm on the planet, which is where your stock is held, not to mention where your checks go to as well. You’ll also get the annual report, the 10K, the confirmation, all of which will be much better than you just telling your wife that you want to buy stock from someone you’ve never spoken to in a company you’ve never heard of.
“___, what do you think she’s going to say?
“Exactly!”
“Let me explain the way I see the conversation going. If you set aside five minutes to speak about it tonight, you’ll tell her some guy from New York called you on the phone and wants you to send him 5 or 10 thousand to buy some stock.
“She’ll ask you what company.
“Either she hits you over the head with a frying pan, or you’re sleeping on the couch tonight!
“Either way, she didn’t have the chance to make the decision with all the facts. You said you like the idea and see the opportunity to make money.
“What I’m saying is this: You position yourself and your wife in ___ shares now. I know she will respect your decision on a small trade. Then sit down with her, review the FedEx package, and make the decision to work larger together.
“Besides, that whole conversation, I’m sure, happened with a few companies over the past few years like an Intel or a Microsoft, before they became the powerhouses that we know of today.”
There were a dozen power closes that the broker-trainee was expected to know backward and forward before getting on the phone with a stock idea. Power closes were used to wrap things up and ask for an order after using a rebuttal to put a prospect’s objection to bed. The Third Reich itself would have been impressed with the efficiency of it all.
“Let me ask you a question.
“If I had been a broker for the past few years making you money on a consistent basis, would it be fair to say you’d be a bit less hesitant?
(“No”)
“You mean to tell me that if I had positioned you in ___ and within ___ it was trading at ___, you wouldn’t take something here?
“Of course you would!
“Now I understand I don’t have the luxury of a track record with you, but that’s all I’m looking to establish here today.
“Let me take a step back … what you do know is my name: _________. What you don’t know is that I work with the top team of partners here at (brokerage firm name). Our team runs the retail and institutional divisions at the firm. It also contains some of the most successful brokers and analysts on Wall Street. We didn’t get to this position by being wrong all too often, or by any means working on small trades.
“However, in an effort to make you feel a bit more comfortable since you like the idea, let’s do this: start small, we’ll pick up a block of ____shares, a cash outlay of ____dollars.
“It’s a bit less than we originally spoke about, and you’ll make less money as the stock trades higher, but you’re percentage gains remain exactly the same. You judge me on that and that alone, and I think the biggest problem we’re going to have is that you didn’t pick up more!
“Is the ____ shares OK, or would you like to take a stronger position?”
“I sense you’re being a bit more conservative right now because you don’t know me, am I correct? I’m a very conservative broker myself. I promise you, I didn’t get to this position by not taking into account my clients’ downside risk.
“Hypothetically, if we picked up___ shares, and the stock drops ___ points, and you lose ___ dollars, is that going to make you a poor man? Of course not, or I wouldn’t be on the phone with you!
“Now, when I’m right and the stock trades to ____ like we think it will, and you make ___dollars, is that going to make you a rich man?
“Exactly!
“I’m not getting rich either! My commission, after I split it with the firm and the government—I can’t even buy myself lunch!
“This is to serve as a benchmark, to show that I can guide you into the market at the right time—more importantly guide you out at the right time.
“_____, let’s do this. Open the account for ____shares, a cash outlay of _____dollars. Give me the shot on a small trade in a great company. If you’re not completely satisfied with my level of professionalism and timing over the next 60 to 90 days, I urge you to call me up and fire me as your broker. I’ll sell the stock and send you back your proceeds, we’ll part as friends.
“On the other hand, when I’m right, and I put a buy confirmation on your desk at ____ and a sell confirmation at _____, I want you to work bigger and better on my next idea.
“Do just ___ shares. If you like what I do for you on this, we’ll work bigger and better down the road, OK?”
“Let me ask you a question. If I put you into ___ at ___ and the stock drops like a rock to ___, would you ever listen to me again?
(“Yes”)
“You’d listen, but you wouldn’t buy!
“Now on the flipside, say the stock goes from ___ to ___. I think it’s fair to say that you’d be a bit less hesitant and you’ll want to work bigger and better on my next idea, am I right?
“Exactly!
“What I’m saying is this, I have one shot to make you money. That’s it. I love baseball, but I’m not a baseball player. I don’t get the three strikes. If I blow it, I’ve blown a relationship for the long term.
“Give me that one shot. Pick up ___shares, a cash outlay of ___ dollars. Judge me for the next 60 to 90 days on my pricing and timing, and the only regret you’re going to have is that you didn’t know me well enough to buy the original ___ shares.
“Stretch with me this one time on ___, and I’ll never have to ask you to stretch again!”
“___, the reason I’ve been so successful with my clients is because I like to put things on a scale.
“Your downside on ___ shares is roughly ___ dollars. Your upside is not the few grand that you stand to make here on ___. Your upside is establishing a relationship with a top Wall Street broker who’s made a fortune for his clients time and time again.
“Obviously, it hasn’t happened on a couple hundred or even a couple thousand shares of any stock, but on three or four carefully selected investment banking opportunities:
1. When my clients are liquid
2. More importantly, when my performance warrants it
“Do this: pick up ___ shares, and give me the next 60 to 90 days. If you’re not satisfied with the performance of the stock, or with me for that matter, like I said, you call me up and tell me to sell the stock and send you a check, end of story.
“But when the stock performs as I say it will, you promise me that we will never work at these small levels again …
“Work with me on ___ shares. You won’t be disappointed!”
So there you have it. The methodology of the Straight Line, the rebuttals to every specific objection, and some of the power closes that have been designed to get you from no to yes. One of the fundamental reasons why brokers in general can’t make you money is that they spend a majority of their day practicing, delivering, or training others in this very pitch.
And if some of the lines sound corny or hokey, keep in mind that corny works. Hokey sells stocks and opens up accounts.