What You Need to Know
The widely reported recent decision by Merrill Lynch Wealth Management to bar its 3,000 advisor trainees from making cold calls as part of the firm’s new training program is perhaps the surest sign yet that if cold calling isn’t already dead, it’s getting there, according to industry experts interviewed by ThinkAdvisor.
Merrill trainees will be asked to rely on internal referrals and LinkedIn messages instead, according to a report in the The Wall Street Journal.
The development followed Merrill’s move last summer to end cold calling in response to outreach-related violations, according to Business Insider, which obtained a copy of an internal memo written by Jennifer MacPhee, who later retired from her role as head of Merrill’s training program.
The firm didn’t respond to a request for comment on why it decided to bar cold calling now. But Merrill President Andy Sieg said during a call with analysts in April, “We are leaning much more heavily on leads and referrals from the broader company. There is also an opportunity to be much more modern in terms of the way we are reaching out to prospective clients.”
The trainees are expected to get more referrals from the bank’s base of 66 million retail clients, people familiar with the matter told the Journal.
JPMorgan Chase, Morgan Stanley, UBS and Wells Fargo all either declined to comment or didn’t respond to requests for comment about their companies’ cold calling policies.
Speculating on why the firms were reluctant to speak publicly about the subject, Timothy Welsh, president, CEO and founder of Nexus Strategy, told ThinkAdvisor: “It’s the whole image that they’re trying to cultivate” of their brokers and advisors “being professional.”
This “whole elevation of the role of the broker/advisor is really important to them because they know that they’re losing market share to RIAs… who are professional, who don’t cold call, who hold themselves to a higher standard [and] are fiduciaries,” said Welsh, who was vice president of marketing at Merrill Lynch from 1992-1999.
The wirehouses, in particular, “know that they’ve got an image problem and so this is just one more” negative the firms have to deal with, “beyond the fraud and the Ponzi schemes and the fines” that are widely reported on a regular basis about brokers, he said.
The wirehouses also have a “turnover problem,” he said. As they try to recruit people to join them, cold calling is likely a turnoff to at least some candidates who don’t want to just be salespeople making phone calls to sell products, he explained.
The ‘First Death Knell’
The “first death knell” for cold calling was online trading, which gave investors the ability to make trades on their own, Welsh said.
Merrill’s decision to bar cold calling likely won’t hurt it because cold calling generates only a “very tiny amount” of business, he noted.
Although he was reluctant to call cold calling dead, he told ThinkAdvisor: “It’s definitely on the way out.”
The success rate for cold calling has always been relatively low and there are also better ways now to find new clients, including searching on LinkedIn, advertising a webinar and sending targeted invitations to prospective clients, he explained. Many people don’t even want to use phones anymore, he added.
However, he predicted it will be “tough to police” whether trainees or anybody else at Merrill are making cold calls — unless those receiving unwanted calls complain about them, especially if they turn out to be phone numbers on the National Do Not Call Registry.
Merrill terminated two broker-dealer representatives who violated the firm’s Do Not Call List policy late last year, according to the Financial Industry Regulatory Authority’s BrokerCheck website.
The Pandemic Served as ‘Rocket Fuel’
“What I personally think is going on here is just what we’ve been seeing for years and 2020 really just put rocket fuel on,” said Samantha Russell, chief evangelist at FMG Suite and chief marketing and business development officer at Twenty Over Ten. “Cold calling has worked less and less effectively every year that the Internet has been around.”
People look to the internet to solve their problems and to research products and services before buying, she noted. “We do this for everything, whether it’s hiring a plumber or at what hotel are we going to stay when we go on vacation,” she said. “Financial advice is no different.”
People can also screen their calls now with caller ID and block telemarketing calls, and “you can put your number on the Do Not Call list,” she said.
“From a cost-per-lead basis, it’s very expensive and not that rewarding,” she told ThinkAdvisor.
However, she wouldn’t declare cold calling dead, either. “I think we’re still a long ways off from it being completely extinct,” she said. “I think what is changing though is, rather than having just a list of people that you have no knowledge [of] and they have none of you, we’re going to see a lot more methods [including] what we call a warm leads list.”
That list can include people who have seen information about an advisor online and fill out a form to get more information about something, she noted.
“That person doesn’t necessarily have to know you in order for that call to take place,” Russell said. “But it gives you much more of an in and makes it much more compelling for somebody to … listen to what you have to say than just calling somebody straight cold.”
Advisors can also generate leads with the help of LinkedIn, which she said “a lot of financial advisors” find to “be the most successful platform” of all the social media networks for them.