Cold-Calling Goes Cold

For many firms, it has been a rite of passage: get a list of names of people you’ve never spoken to, get them on the phone, and convince them to buy something.

But the era of cold calls may be quickly fading away.

This week, Merrill Lynch Wealth Management rolled out a new advisor training program that bans trainees from making cold calls. Merrill, like many Wall Street firms, for decades had used cold-calling as a way of finding clients, but the firm’s leaders believe there are other, more effective ways to discover new customers.

At the same time, the pandemic may be hastening the activity’s demise as business leaders rethink how best to sell products and services. “We’re all looking to feel more connected, and cold-calling is impersonal as it gets,” says Tom Wroblewski, Korn Ferry’s leader of global sales and service integrated solutions. “It’s called ‘cold’ for a reason.”

Financial firms had been gradually moving away from cold calls in favor of so-called “warm” calls, where a financial advisor is introduced to a potential client through somebody else. Advisors will ask their existing clients, scour their LinkedIn networks, check in with old classmates, and other methods to get leads. There’s also software, powered by artificial intelligence, that can help make connections between an advisor and a potential client that might not be obvious. “The advisor is coming into the relationship with a certain level of credibility because of the warm referral,” says Alan Guarino, vice chairman of Korn Ferry and coleader of the firm’s Board and CEO Services practice. “Then it’s up to the advisors to differentiate themselves and win the client.” Indeed, Merrill has stated that it wants its advisors to lean more heavily on leads and referrals to find new clients.

There’s a reason cold-calling has stuck around, however: it works. On average, only about 1% to 3% of cold calls result in a sale. That sounds dismal, but organizations that sell high-priced products and services have been satisfied with the math as long as salespeople make enough calls. Indeed, some finance firms would have young associates make several hundred cold calls each day.

There’s also a feeling that cold-calling is an effective way to identify motivated, talented salespeople. “Cold-calling teaches you how to get your pitch down succinctly,” Wrobleski says. Salespeople who make cold calls can become very agile, adept at answering questions, and importantly, learn how to deal with rejection. Firms that move away from cold calls will have to find other methods to replicate its positive talent attributes.

Plus, there could even be a glorification of cold-calling, or at least a natural reluctance to change. Guarino calls any nostalgia for cold-calling is “pretty silly and poor leadership,” but admits that it likely happens in finance and other industries.  It’s akin to veteran doctors being upset that younger physicians don’t have to work 100-hour weeks—a practice the veteran doctors went through, says Linda Hyman, Korn Ferry’s executive vice president for global human resources. “There’s kind of a built-in embedded idea that if my grandfather did it then everyone else should do it,” Hyman says.

To get people to abandon an old practice, Hyman recommends using data to show whether that practice actually works. In the physicians’ case, many doctors became less enthusiastic about the 100-hour weeks when they were given statistics on how many mistakes young doctors were making during their marathon rotations. “The whole mindset can change as people are presented with statistics on the effectiveness,” she says. Regarding cold calls, leaders might be able to show the success rate of warm calls, which can be near 30% in some industries.

That old-guard resistance also could fade due to leaders talking about all the other new realities of the post-pandemic business world. No one would have thought 14 months ago that thousands of US organizations would stop selling goods at stores entirely or do every sales call over videoconference.