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The Merrill Lynching of Financial Services

Updated: Jul 20, 2023

Bank of America’s Merrill Lynch announced a couple of weeks ago that they’re to ban trainee brokers from making cold calls. In a shift for the training program on The Street that dates back to 1945, recruits will now be directed to use internal referrals and LinkedIn messages to prospect for new clients.


I, on the other hand, was raised by wolves. These coddled young financial advisors, wealth managers, stockbrokers, or whatever we’re calling ourselves these days have no idea. Merrill’s decision to revamp their advisor-training program comes after the program’s 3,000 trainees were told to stop outbound recruiting efforts to find new customers last year after “problematic phone calls.”

A problematic phone call? What the hell is that?


Oh, no, this everyone-gets-a-trophy generation of brokers will get more referrals from B of A’s pool of 66 million retail customers. …In other words, if you think the way Facebook tracks you all over the web is creepy, just wait and see what your bank starts doing to you.

Merrill’s trainees will also be encouraged to contact prospects over LinkedIn, which they said has a higher hit rate than cold calling. Don’t get me wrong here-- I love LinkedIn. It’s like Facebook for grown-ups, and I use it all the time. But it’s definitely not where most of our clients come from. Nobody becomes a client without real conversations, and I got very proficient at chasing down those conversations 25 years ago.


In his first book, Confessions of a Street Addict, Jim Cramer wrote about being airdropped into random towns in upstate New York and using microfiche in the local library to determine who the richest people were from newspaper articles. That’s what Goldman Sachs was teaching their young recruits in the 80’s.

That spirit was still alive and well when I came into the business in the 1990’s, although changes were already underway. The do-not-call list was brand new (but still widely ignored). Merrill was pushing their Financial Foundations financial plans and training brokers to sell those. And most other firms were emphasizing seminars and workshops to attract prospective clients.

I eschewed all of that. Merrill wanted $300 for those Financial Foundations plans, but if I was going to do all of the work to convert a prospective client into a buyer, why would it be for a paltry $300 item? If I were going to get someone to take action, why would I make that action be to attend a seminar instead of to buy something? …Preferably, something big.

So, I developed a system. I wasn’t ever going to be the guy who sat around the office in the evening calling people at home just as dinner was about to come out of the oven. And I was on the west coast, so getting to the office for the stock market open at 6:30 a.m. was less than desirable. I still needed to make calls, though.

The internet was new, and there wasn’t any social media yet. However, FDIC had a website that listed every single bank in the country with information about their management, their capitalization and more. Calling banks was great. Banker’s hours, nine to five-- and banks weren’t on a do-not-call list-- far from it. In fact, their CFO’s sat around all day just hoping for a guy like me to call them.

“I’ve got a bond from your local school district. You want a bond?”

“Yes, I’d like a bond.”

“I have 1,000 of them; do you want them all?”


“Then I will sell them all to you.” (With three points in them.)

Along with banks, I also called doctors. Just like banks, they were easy to find and kept predictable hours.

“Hi, is Dr. So-and-So there?

“I’m sorry, he’s currently in surgery.”

“Great! Just put me through to the O.R.; he’ll want to take this.”


I think that sort of trial by fire was great for my career and clients. This business has always required nearly unlimited chutzpah and absolutely zero fear of rejection, but it has also required (and is now missing) an intellectual curiosity that died in brokerage training programs more than twenty years ago. Merrill’s action last week was just throwing a little extra gravel on the grave.

As readers of this column know, RG is more active in our portfolio management than most financial advisors currently in practice. We moderated risk in January of 2020, we boldly proposed to Get Long America on the day of the March low, and we emphasized selling bonds and the rotation into commodities and financial stocks back in January of this year. In other words, our gamut of experience has helped clients to do better, and a lot of that know-how was earned on the job.

That ability was developed by actually talking with people about their situations and the very real need to find solutions in order to earn their business. On the other hand, if a young financial advisor is being fed leads from his bank, there’s little need to provide solutions; you just have to not screw-up. As Henry Ford once said, “If I had asked people what they wanted, they would have said faster horses.”


And when it comes to what people currently want, is there anyone out there who wants interest rates at zero and emergency bond buying programs at the Fed to go on forever, regardless of economic conditions? (Maybe, but those people recently either fell down their stairs or got struck by lightning.)

We have been suggesting for some time that the stock market will not take kindly to any suggestion by the Fed that it will begin shrinking its balance sheet, but it shouldn’t be a surprise to anyone when they start to do it. Fed Chair Powell told Congress last week that the Fed had formally begun discussing when and how the central bank might reduce the current $120 billion a month of Treasuries and mortgage-backed bonds that the Fed is purchasing each month, which sounds to me like everything that happens at the federal government level these days-- they have a plan to have a plan.


The last four times when monetary stimulus was flat to down were in 2011, 2015, 2018, and 2020. Each time, the stock market fell 10-20% over one- and up to five- month periods.

· In 2011, the Fed hinted at not expanding its asset purchase program just before a 19% drop in the S&P 500 over 5 months.

· In 2015, talk of balance-sheet shrinkage preceded a one-month decline in the S&P of 12%.

· In late 2018, a comment about the Fed balance sheet un-wind on “autopilot” plus the ongoing trade war coincided with a nearly 20% S&P drop in three months.

· In 2020, the S&P dropped 10% (with 7% in just three trading days starting on 9/2). The Fed balance sheet had been flat to down since mid-June.

OK, so hey, you might ask, why does anybody pay attention to any central bank’s balance sheet anyway? Two words: debt monetization. These guys have a pretty good handle on it:

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