Alex Freemon was so eager to be a stockbroker after graduating from the Georgia Institute of Technology last year that he said he was happy to go door to door selling mutual funds for Edward Jones.
The brokerage flew him to St. Louis, where he practiced knocking on a model door in a classroom of would-be brokers at the company's headquarters. He then went back to Atlanta to walk the streets for 10 hours a day for about $30,000 a year plus commissions.
Mr. Freemon said he quit in March after realizing he would have to spend five years struggling to meet sales goals before he could focus on helping clients make financial plans.
“Until you actually go out and hit the pavement, it doesn't really sink in,” said Mr. Freemon, 23, who now works as a business analyst at a software company in Atlanta. “It's not impossible, but it's definitely not sustainable if you have a family or anything to do besides knocking on doors.”
Breaking into the brokerage business is getting tougher as declining fees make small accounts less profitable and government restrictions on unsolicited calls make phone sales taboo. That is leaving big firms struggling to replace a retiring generation of financial advisers who helped accumulate trillions of dollars of assets and generated steady profits for years.
“The only way you can do it is if your dad is rich and he's got country club buddies he can send you — or you're a psycho who can work 20 hours a day,” said Josh Brown, who helps oversee about $350 million in assets at Fusion Analytics Investment Partners LLC.
ONCE POWERFUL
Stockbrokers for decades have helped manage Americans' money, earning commissions when they sold securities, mutual funds and other products to individual investors. The biggest brokerage firms — Bank of America Merrill Lynch, Morgan Stanley, UBS AG and Wells Fargo & Co. — have seen their market share drop to 42%, from 49% in 2007, amid competition from discount brokers and independent advisers, said Sean Daly, an analyst at Cerulli Associates Inc.
The Charles Schwab Corp.'s client assets rose 14% in the first quarter, more than twice the 6% increase for Bank of America's wealth management unit.
Brokers also are leaving the biggest firms to join or start registered investment advisers that don't take commissions. From 2009 to 2012, the ranks of investment advisers increased 7% while the number of brokers fell 9%, according Aite Group LLC.
Brokerages have cut back on training costs since the financial crisis to boost profits, helping increase the average age of advisers at the biggest firms last year to 53, from 48 in 2009, Mr. Daly said. To maintain their ranks, they're paying millions of dollars in bonuses to lure experienced advisers, recruiter Howard Diamond said.
“It's an eat-what-you-kill kind of industry, and unless you can hit the ground running, the firms are just not that interested in you,” Mr. Diamond said.
Morgan Stanley, which has 16,000 brokers, more than any other firm, last year reduced its trainee class to 1,250, from 2,000, to cut costs, chief financial officer Ruth Porat said in July. Christine Jockle, a spokeswoman for the firm, said the smaller training program still is sufficient to replace advisers who leave.
Bank of America plans to hire at least 1,200 trainees this year at its Merrill Lynch brokerage unit, which has the second-most advisers, down from 2,500 in 2012, according to spokeswoman Susan McCabe. She said the fluctuation is normal and declined to say how big the training program was previously.
“Nearly 80% of our revenue comes from people who started in the training program,” said Dwight Mathis, head of new-adviser strategy at Merrill Lynch.
Selling stocks to individual investors has long been a way into Wall Street for those with little experience. Billionaire investor Carl Icahn's first Wall Street job was at Dreyfus & Co., according to his website. A former colleague, who asked not to be identified because he still works in the industry, said he knew Mr. Icahn would be successful when the colleague was trying to pick up a woman at a dance at a Catskills resort and saw Mr. Icahn sign up her father as a client. Mr. Icahn didn't respond to messages seeking comment.
“We were viewed back then as having a lot of information that no one else had,” said David McWilliams, who became a broker in 1978 when he was 21 and now heads wealth management transformation at the U.S. brokerage of UBS. “You couldn't get a stock quote without calling us.”
200 CALLS A DAY
“It's a numbers game,” said Chris Gardner, whose struggle to make it through the training program at Dean Witter Reynolds Inc. while homeless and raising a son was the basis for the 2006 movie “The Pursuit of Happyness.”
“You just sit down and you start making the calls, 200 phone calls a day,” said Mr. Gardner, who closed his brokerage Gardner Rich LLC last year and now is a motivational speaker. “That's not going to be effective anymore. Everything now is done electronically.”
That's been made more difficult by the popularity of the National Do Not Call Registry, established by the Federal Trade Commission in 2003.
“Cold calling is certainly challenging, given the advent of no-call lists,” said Tom Allen, who helps run Wells Fargo's 800-person training program, where trainees are 36 on average. “Everybody's got caller ID these days, and everybody screens their calls.”
Advisers need more experience now because they spend the majority of their time helping clients with retirement and estate planning rather than pitching stocks, Mr. McWilliams said. The Swiss bank this year will place almost half of its 200 trainees into salaried positions helping established brokers rather than starting them as commissioned salesmen, he said.
Wall Street's training cutbacks have left Edward Jones, a 91-year-old firm with more than 12,000 advisers, as a bigger employer of would-be brokers than Morgan Stanley and Merrill Lynch combined. It hired 2,682 trainees last year and plans to add a similar number this year, according to Steve Kuehl, a partner who helps run the program.
DOOR KNOCKING
Early in their training, Edward Jones brings new brokers to its headquarters, where they practice knocking on doors and talking over finances in “role-play suites” designed to look like homes or offices, Mr. Kuehl said. They review tapes of themselves with coaches to improve their technique, he said.
After the role-playing, Edward Jones brokers return to their towns, where they're told to go door to door to compile a list of prospects. Michael Cheung, who worked for the firm in 2010 when he was 25, said he'd sweat through his clothes walking in Gulfport, Miss., until he looked like he “came out of a swimming pool.” Brokers must watch out for dogs, he said.
The training program has allowed Edward Jones to keep its sales force about the same size even as more than 10% of its brokers have left each year since 2007, filings show.
Hiring brokers away from competitors isn't a sustainable strategy for replacing those who retire, according to Bob Patrick, 51, director of education and development at Raymond James Financial Inc. The company has extended its 138-person training program to two years, from four weeks, to increase its success rate, he said.
“We can't keep rotating people around, because we all keep getting older,” Mr. Patrick said. “We're extincting ourselves.”
