Hanging up: U.S. to restrict advisor cold calling

(July 21, 2003) The United States is moving ahead with a plan to restrict unsolicited telemarketing phone calls, a change observers say could spell the end of “cold calling,” a popular method among some advisors to generate new sales leads.

The Federal Trade Commission, which regulates the U.S. communications industry, will introduce a “do not call” registry this fall. Individuals who sign up for the registry cannot legally be called by telemarketers, a catch-all definition that now includes advisors.

The change means American advisors must purchase the registry and carefully check their list of sales prospects to ensure compliance. Advisors were initially exempt from the new telemarketing rules. Failure to comply could result in a fine of up to $11,000 US.

“People have a right not to be called,” Texas-based advisor Kevin Lynch told U.S. Web site www.financial-planning.com. “So we as financial services providers are simply going to have to use alternatives by which to contact folks.” Lynch expects cold calling to eventually disappear as advisors look to other prospecting methods.

In Canada, there are currently no restrictions on cold calling directly related to advisors. However, firms using the technique must maintain a “do not call” list for those who request it. The Canadian Radio-Television and Telecommunications Commission (CRTC) is reviewing its rules on telemarketing and expects to issue new guidelines sometime this year. In a call for submissions, the CRTC asked respondents to indicate whether new restrictions should be placed on telemarketers and whether a “do not call” registry should be introduced in Canada.

As Lynch suggests, the demise of cold calling may not even be an issue for many advisors. In last year’s first Annual Dollars & Sense Survey conducted by The ADVISOR Group, 16% of advisors said they used cold calls or telemarketing as a source of generating new business, lagging well behind other more popular techniques, such as referrals, direct marketing and networking.

Vancouver-based marketing expert Don Pooley conducted his own poll of top Canadian advisors earning more than $200,000 annually to find out what their favourite prospecting techniques were. Referrals were at the top of the list, while cold calling was near the bottom. For advisors earning less than $100,000 a year, cold calling was more popular. “Cold calling is in the bottom third of the high earners’ list, and the top third of low earners,” Pooley writes on his Web site. “Is there a message here?”

Although cold calling may be an effective business-building technique for new advisors, Pooley and others suggest newsletters and e-mail as possible alternatives. “E-mail can be an effective way to reach a targeted group of people very quickly and get a response,” consultant Martin Baird wrote in an article for Advisor.ca earlier this year. “I’m not saying that you should send out spam asking people to invest $1 million today — that won’t work. But what if you passed along some great tax-saving tips or described some viable investment alternatives to simply parking money in GIC?”

Do you think cold calling should be restricted in Canada? Is it an outdated technique or an effective business-building method? Share your thoughts in the “Free For All” forum of the Talvest Town Hall on Advisor.ca.

Filed by Doug Watt, Advisor.ca, dwatt@advisor.ca