The World of a Stock Broker By Bob Harrer  Monday, April 5, 2004

Editor’s Note: In a series of articles in “The Big Picture,” New Age Investor will have professionals from various fields present a real-world look into their jobs. The articles will serve as a medium by which young adults can learn what certain occupations are truly like and, thus, clear up common misconceptions. In this article, Bob Harrer, a former branch manager at a large regional brokerage firm, gives an inside look into the world of a stock broker (also commonly referred to as an investment advisor or a financial advisor).

Many young adults dream of being a ‘stock broker’. They fantasize of the day when they learn about that hot, new tech stock and pitch it to thousands of clients who are just waiting for their word before investing their life savings. After graduating college and getting hired by a reputable New York City firm, many think that the day they always dreamed of is around the corner. However, most soon-to-be brokers fail to realize what exactly is involved in a stock broker’s job.

For one, you have to pass the Series 6 (the license that allows you to sell mutual funds and variable annuities), the Series 7 (the license which allows the broker to sell stocks), the Series 63 (the state license), and finally get your insurance license, before you can even talk to people about their investments.

Once you pass the tests, time for the big bucks right? Wrong. First and foremost, all new brokers must learn to become salesmen. Sell yourself and your firm, make an appointment with the potential client, and get them to come into your office. Then, and only then can you become a ‘stock broker’ and talk about stocks, bonds, mutual funds, and the many other investments that a brokerage firm has to offer.

How do you sell yourself to people? Well, first of all, you have to find them before you can sell them anything. How do you find prospects and clients? Prospecting is one of the most difficult jobs that a stock broker has to do.

The most common form of prospecting is cold calling. Cold calling is difficult but not impossible. The best and most experienced cold callers have years of practice and are defined by their incredible articulation and seeming inability to accept ‘no’ as an answer.

To make a living, a person just starting out in the business needs to come up with some creative ideas on how to call prospects on the phone. One of the ways that often works is going through the phone book and looking for particular cities or prosperous streets. When you reach someone, tell the person answering that a friend of his gave you his name and suggested that you call him. You can say the friend wanted to remain anonymous, so he refused to give his name (You will pick up all the tricks as you go along). Try to set up a 10-minute appointment with this prospective client to discuss investment goals. This method often works, but you have to honor the 10-minute time frame and set up a second appointment if the person shows interest.

Another way to attract potential clients into your office is to set up a short seminar about a specific topic, such as retirement planning. In the seminar, you will want to mention investment planning ideas and encourage those interested to set up a personal appointment with you. Many brokers will hold seminars at restaurants and treat potential clients to dinner. This method becomes costly but is an effective way of attracting people to your seminar.

New brokers soon learn that the best way to find prospects is to network and meet potential clients in person. Another good way is to have a current client refer you to someone else. Referrals take time and require a proven track record of success. However, in order to thrive in the business it becomes a necessary tool.

The brokerage business, as was so appropriately defined in the film Boiler Room, is a “numbers game”. If you call 50 people, you will get 3 appointments, and you will make a sale to one. This possible sale increases exponentially if you get to know your prospect. If he/she is a warm call (someone you have met in person), you have a much better chance than if he/she is a pure cold call. Cold calls are very hard to do at first but the better you are at making cold calls, the better business becomes. Turn a cold call into a warm call by meeting the person face to face; turn a warm call into a hot call by making an appointment with someone who has shown a specific interest. Hot calls sell.

As an experienced broker, my advice has always been to cold call in person! By that, I mean go into business complexes and talk to business owners and employees in person and set up appointments for some time in the future. Try saying something like: “Mr. So and so, I am just as busy as you are, and I am just in between appointments. I have about 3 minutes. Here is my card. If you have any interest in discussing investments in general, or something else in particular, please call to make an appointment.” Try to get his/her business card and if he/she doesn’t call, be sure to call and follow-up. You should have very good results using this approach.

Even once you make it up to Vice President of your firm, you will still make dozens of calls every day but most are not cold calls. They will mostly be calls to clients that do business with you. Yet, like all brokers, you will still prospect each day, as you will always want new business. You will find, however, that once you’ve been in the business for a while, many of your calls are warm calls or referrals. Many experienced brokers hire interns or assistants to place the cold calls.

Getting started in the brokerage business is difficult, but every day that you are in it, you will become stronger and smarter and, thus, gain more clients. The sincere brokers that have the best interest of their clients constantly in their mind will not only succeed in helping their clients invest their money but also stand a good chance of doing very well themselves. If you like people and want an exciting job managing money and following the markets, the brokerage business could be for you. It could, in fact, be just the call you want to make.

Terms to Know

Series 6 license - allows you to sell mutual funds and variable annuities.

Series 7 license - allows you to sell stocks.

Series 63 license - allows you to solicit orders for stocks, bonds, and mutual funds in a particular state.

Prospecting - the process of finding new clients for a stock broker.

Cold call - a random call to someone you have never met nor talked to.

Warm call - a call to a potential client that you know something about, have already spoken to, or have already met in person.

Hot call - a call to a potential client with whom you have already had a conversation with, making the call a follow-up to see if the person has any questions or to set up another appointment.

Network - essentially, it means to meet people through any means possible, such as attending local events, going to open meetings (like shareholder meetings), etc. For a new stock broker, networking involves meeting new people at various events and functions to try to get your name, gain new clients, and get referrals.

Referrals - when a current client or potential client gives you someone else’s name who may be interested.

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The World of a Stock Broker - 04/05/2004