My first day of production on Wall Street was the day the market crashed in October 1987.
The similarities between my Wall Street career and the film’s swashbuckling protagonist end there.
Jordan Belfort went on to build a bucket shop that was ruthlessly efficient in selling penny stocks to “dreamers”, while his brokers celebrated the stupidity of the client buying their schlocky pitch. In real life, he eventually went to jail.
I took a different path. I managed not to get fired at my first job on Wall Street in 1987 – 36 of 38 in my training program did. Instead, I went on to do what I love: Help people find good places to invest their money.
Why It Can’t Happen Today
Entertaining as the movie is, the bacchanalia depicted in the film isn’t happening today, no matter what the public may think of Wall Street.
The world is vastly different for several reasons.
First, the penny stock scam Jordan Belfort’s crew was running occurred because of a lack of transparency. The information vacuum of penny stocks back then resulted in huge margins for the broker.
In the digital age, even an inexperienced investor can get on the Internet and in a few keystrokes, determine if the investment passes the sniff test. Before the informational age, it was too easy to pull one over on investors.
Second, brokers in the 80s were just that – brokers. They had no foundational fiduciary training to act in the best interests of their clients. It was buyer beware. There was no reason for a broker to feel guilty if the prospect didn’t do his homework.
Third, many people advising clients today behave as a financial advisor – even if they are technically a broker on Wall Street. They act as though they have a fiduciary responsibility. Firms employing stock brokers know it’s too expensive in terms of lawsuits and reputational damage to be as cavalier as The Wolf.
Finally, clients today have a choice. Independent advisors and Wall Street advisors that act as fiduciaries are keeping the industry honest. In the go-go days of Wall Street, you couldn’t easily find an independent advisor who would give you honest advice. You were stuck with Wall Street or worse.
The ethical advisor has completely changed the way wealth management is delivered. I’m proud to be part of that movement.
What Was Everyone Thinking Back Then?
As a window into that time in America, the Wolf of Wall Street is not far off the mark, based on my own experience.
The Wolf, Jordan Belfort, pursued a job on Wall Street because it was the highest paying job at the time. It’s no different today. The best and brightest are heading for the Valley because that’s where the big money is.
The corporate debauchery on Wall Street in those days was perpetuated by a training regime that first emphasized sales, not investment advice. If you were lucky enough to make it past your first six months, only then were you trained to be an advisor. We all know now that is patently wrong.
During that training period, it was torture. Your goal was to make 100 calls a day. You smiled and dialed constantly. You recorded everything on a piece of paper with a grid from 1 to 100. You crossed off a number after making a dial, circled the number if you got someone on the phone and placed an X in the circle if the person wanted you to send more information.
At the end of the day, you turned in your call sheet to your assistant branch manager. Brokers kept their job by opening 10 accounts a month over their first six months of production.
Just like in the movie, we all had scripts for selling investment products and for overcoming the most common objectives – “I need to talk to my wife first.” There was too much money at stake not to be well prepared.
In an atmosphere like that – where you saw huge amounts of money being made and were always living in fear of being fired – it was easy to bond with the person sitting next to you. Making 100 calls a day sucks. However, if the guy next to you is doing it, it is a little easier to swallow. You’re experiencing the same hell.
When someone did succeed, it was exciting. It gave the rest of us hope. As a young person, being part of such a club was a heady experience.
Greed Can Infect Anyone
The only real difference between Wall Street and Jordan Belfort’s bucket shop was that Wall Street “sold” better products.
The sales tactics were damn near the same. They were high pressure and preyed on people you didn’t know and didn’t care about. They were a faceless contact with a wallet. The welfare of their family or the individual wasn’t as important as you keeping your job.
That said, it wasn’t only Wall Street’s greed that created Jordan Belfort. Clients were also drawn by the same get-rich-quick promises as everyone on Wall Street. The wealthy prospects got Wall Street; anyone with just a little money was left to the bucket shops.
What’s constant is that the appeal of sudden riches is just as captivating today as it was then. While those with less means are clearly vulnerable, it is often the mass affluent – those with $250,000 to $1 million in assets – that are most susceptible to fraudsters. I’ve been around the block too many times to naively believe greed will ever go away.
Money corrupts, and in the case of The Wolf, it was absolute corruption. The good news is that the culture, ethics and regulation have all dramatically changed Wall Street for the better.
It might not be as much fun as it used to be, but Wall Street is a much better place. It’s inhabited by people who care a whole lot more about their clients.