How should a good broker cover a client? The art of brokerage is extremely challenging, mostly because many sales managers require antithetical skills to be displayed at all times.
There are two inviolate rules of coverage (whether individual or institutional) that even the most mettlesome of managers will recognize and accept: one, know what your client wants and, two, know what your firm does well.
The first is pretty obvious but is forgotten or ignored constantly. Some places institutionally ignore it, by having cold-calling brokers trying to jam stocks down people's throats on first call. These guys aren't real brokers and they don't work at real brokerage firms, so let's save them for Bill McLucas from the
and Mary Jo White, the dynamo U.S. attorney who investigates brokerage corruption. If you get a call from a jammer, just hang up. If you are the one making those calls, clean it up.
As a former broker, and now a client, let me explain why knowing what the client wants is important. All I want in the morning is to get you off the phone so I can get to my next task. I think it is fair to say that is everybody's m.o. If you know what I am looking for and I know what I am looking for, you will be able to make more calls and I will be able to take more calls. That's good for everybody.
The second point, though, what your firm does better, is a much tougher call. My old boss, Walter Haydock, who did a lot of great teaching, used to tell me that the broker's job is to find out what is "proprietary" about a firm's research and be sure that you relay it, even if it is over the client's objections. In other words, this rule trumps number one.
Walter used to tell me there was a simple way to tell what was proprietary: something that your client would take your head off about if it got on the news tape and he didn't know it beforehand, or it moved a stock, and he didn't know it beforehand. Good brokers must err in favor of information overload in figuring what may be proprietary, because it is easier to apologize for going on too long than it is to apologize for something you missed that was proprietary.
Brokers should spend a tremendous amount of time trying to figure out what is proprietary. For instance, when I was a salesman at
I did not really care for the airlines, but we had a very powerful airline analyst. I thought the group stunk, but I always pushed any call made by the airline guy. That was right. I loved our software guy, Rick Sherlund, still do, but he was not a big name when I got in the business. I would, in my spare time, pitch Rick, but I always subordinated his stuff to the airline guy if they were both on the call, because clients didn't really care what I thought was important. That's right, too. You work for a firm. If you want to work for yourself, go do it. But not on your firm's time.
It always helps the broker's job if the client would take the time out to tell him what stocks the client is interested in. My partner Jeff puts together a stocks-of-interest list that allows our brokers to know where we are going. We don't reveal shorts or longs, just names. That puts the onus on the broker to know what we want, so again, it is good for everybody.
Finally, a word about sales managers. Brokers, leave these guys back in the home office, they are nothing but trouble. One of my favorite brokers brought his sales manager in to see me once, and the first words out of the guy's mouth were "Why aren't you doing more business with us?" I showed my anger visibly, as if there is some entitlement out there where business must be done. That's the height of arrogance. I even made a mental note to mess with this guy's career the first chance I got -- which, not coincidentally, is right now!
James J. Cramer is manager of a hedge fund and co-chairman of TheStreet.com. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Mr. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he welcomes your feedback, emailed to