Is Cold Calling Dead?

“Anything you’re doing completely cold in 2021 is not going to be that effective unless you have some way to direct [people] to a place” where you are providing information of interest to them and show them you are an expert in providing financial advice, she explained.

Dead and Buried?

“Cold calling, by and large, is already dead and buried and Merrill Lynch was the first one to attend the shiva,” Danny Sarch, president of Leitner Sarch Consultants, told ThinkAdvisor.

However, Sarch conceded there could be developments in the future that change this. For now, however, “what is the return on investment” for cold calling at any firm? he asked rhetorically.

Very few people are going to accept a cold call from an advisor and say, “You’re a charming person. Let me send you $100,000,” he added. “We’re in a different world than when businesses were built that way.”

Merrill wants to take advantage of its relationship with parent Bank of America’s banking business, and cross-referrals can be generated between the two divisions, he noted. Merrill trainees can also meet clients by working out of bank branches, he said.

It is hard for trainees to get new clients even through referrals, as more experienced advisors do, because “what 55-year-old is going to say to the 25-year-old, ‘yes, you’re the person I want to manage my money!’”

That is why teams are so important, and that is also something that Merrill is focused on, he pointed out.

The Declining Power of Brokerage Brands

Executive recruiter Mark Elzweig agreed that Merrill is “seeking to leverage its relationships with existing bank customers to grow its retail business.”

And, like the other experts, Elzweig agreed that “warm calls or the use of LinkedIn or other social media platforms make more sense” for advisor trainees than cold calls. “I think that there’s a broad based recognition in the industry that new accounts are developed more effectively by niche marketing and social media than by random cold calls,” he told ThinkAdvisor.

“Years ago, newbie advisors built their businesses by pounding out calls to leads on Dun & Bradstreet cards or getting hold of a reverse directory and blitzing residents in a fancy building,” he said. However, the problem is the “power of a major brokerage firm’s name alone is not enough to open accounts that way anymore,” he said.

Like Russell, he predicted that cold calling would linger in the industry to some degree. “There will always be talented salespeople who can garner new accounts via cold calling but it’s much tougher now,” he said.

But “I think that, going forward, there will be very few people who can build a business based upon strictly cold calling,” Elzweig said.

A Potential ‘Downside’

Just because cold calling has become increasingly less effective over the years, however, doesn’t mean that all firms are so quick to officially kill it off.

“I don’t think there’s a big push to stop cold calling at most firms,” according to Andy Tasnady, managing partner of Tasnady Associates. “The whole industry is 100% commission-based, so I don’t see most firms limiting cold calling formally at all.”

Merrill is, meanwhile, “somewhat unique” because it has a “large formal training program, [whereas] most firms don’t have any training program or, if they do, it’s very ad hoc [and] not centrally managed,” he explained.

Merrill is also unique because it has a large bank associated with it so it can “afford to tap that as a source for referrals, so that’s their strategic advantage and its strategic focus,” he said.

For Merrill, the elimination of cold calls is “yet another step in their development of just trying to become more professional and more focused on leveraging” the BofA relationship, he said.

Like Elzweig, Tasnady noted that Merrill is also heavily reliant on advisor teams, calling that an “easier path for new trainees to become successful.”

Merrill has also “been a leader in many types of evolutions historically for a very long time,” including its emphasis on teams, fee-based relationships with clients being more important than trading, phone-based service centers and more, he added.

It is a big enough firm to test different approaches and, “if it doesn’t work for some reason, maybe they will reconsider,” he said. “But my guess is, given the size and the work they’ve done to improve the referral flow between Bank of America and Merrill, they probably feel comfortable that this is not going to impact their ability to make their advisor trainees successful.”

There is a risk, however, for new advisors and brokers. “The downside is being successful at cold calling, I think, can be a very effective training process for salespeople,” according to Tasnady.

But his prediction is that, “as more and more people do shift to more effective forms of contacting,” cold calling will continue to fade away.

(Image: Adobe Stock)

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