These are the times that try stockbrokers' souls. Add one part Saddam Hussein to two parts recession fears and a -- of paranoia about program trading, and you've got a recipe for keeping small investors away from markets.
The fear side of Wall Street's traditional fear-and-greed cycle has been weighing on individual investors ever since the October 1987 stock market crash, and this year's sputtering economy and international hot spots are only making it worse.
To bring small investors back into the fold, brokers are turning to an old but not necessarily well-loved tool -- cold calling to strangers to pitch their services and investment ideas.
"My brokers are prospecting more than ever," said Louis Akers, vice president and branch manager at the downtown office of Ferris, Baker Watts Inc. "You've just got to work a little harder. I've got more brokers working evenings. In a really good market, that might not happen."
"For a young person without contacts, he's got to build a book," said Charles W. "Pete" Shaeffer, Jr., senior vice president for investments at Wheat First Securities Inc. in Baltimore. "There's really no other way for a young person," unless a young broker has a mentor who refers some business, Mr. Shaeffer said.
Mr. Shaeffer said that this year's markets have made cold calling even more important for brokers less established than he. "In the past 6 months it has picked up considerably. Everybody's level of business is off," he said. "This is an industry geared for lots of volume and the volume isn't there."
Nearly 30,000 registered representatives, or brokers, have left the securities business since the end of 1987, said Enno Hobbing, a spokesman for the National Association of Securities Dealers inWashington.
The reason isn't that the markets have been falling since 1987 -- stocks passed their 1987 pre-crash high earlier this year, only to get clobbered after Iraq invaded Kuwait. Volume is off, cutting down the volume of transactions that generate commissions for brokers.
Mr. Hobbing said that the over-the-counter market, which NASD supervises, traded 33.5 billion shares in 1989, down from 37.9 billion in 1987. The first half of this year saw volume of 17.6 billion shares.
Brokers aren't wild about cold calling, said C. J. Thomas, a broker at Legg Mason Wood Walker Inc. in Baltimore who, until this year, was a telephone bond salesman for a Washington firm. It's hard work, with lots of rejection.
"Through sheer numbers you can get some [sales], but the most efficient thing to do on the phone is make appointments," said the 28-year old broker, who said he used to make 150 cold calls a day. A dozen sales made a very good day. "It's not really a fun livelihood," he said.
Mr. Thomas said he now talks to 10 or 15 people a day, doing most sales in person, and makes just about the same money. "The numbers right now are about even," he said. "I've had to build up almost from ground zero."
"It was long but it was exciting," said Maurice Lyons, another Legg Mason broker whose last job involved lots of cold calls. It meant
days of 12 hours or more and hundreds of calls a day, yes, but he adds, "I got a lot of accounts. It was a time of opportunity [after the crash]. People were buying opportunity."
Rejection is the biggest reason brokers dislike cold calling. "Probably 8 out of 10 people you call aren't interested," Mr. Akers said. "Of those two who are, maybe 1 out of 10 of those becomes a client."
Different brokerage firms try different approaches to try to tone down their cold calling, making it seem either less pushy or less impersonal.
Ferris, Baker Watts instructs its brokers to open cold calls by stressing municipal bonds, a safe investment that doesn't give undue pause to prospects leery of investment cowboys eager to get crazy with other people's money. Mr. Akers said he doesn't usually try to make a sale on the initial call, asking only if he can send the client a bond list.
Legg Mason tells its broker trainees to do their cold calling in person, said Laura Lange, director of training. They look for businesses and either talk their way in to see the business' owner, or else they leave a card and follow up. "They go to the tallest buildings they can find and they go to the top floor," she said.
Robert G. Sabelhaus, senior vice president and director retail sales at Legg Mason, said the firm tells people to look for business owners because they are the most likely people to have money to invest, and tells brokers to meet the business owners in person rather than on the phone for several reasons.
"You can't kick off a relationship on the phone," he said. "I believe in doing it in person. You get rejected less. Eight out of 10 people hang up the phone. You can ask more questions at the office. People won't kick you out as quickly as they'll hang up."
Mr. Sabelhaus said a broker shouldn't recommend investments without knowing more than a customer is likely to disclose in an initial phone call. That's bad for the client, and risky for securities JTC firms because they are required to recommend only investments that are suitable for a client's financial resources and goals.
Ms. Lange said that building relationships through in-person client contact helps brokers work less hard and get better results as they mature in the job. Pure cold
callers, she said, just keep cold calling.
"Those people work just as hard 10 years from now as they do at the beginning," she said.
"There's no relationship there. You have to keep cold calling forever. It's a miserable existence. If you build your business, after two or three years you don't have to cold call. Especially right now, that's the way you've got to do business."