Do You Sincerely Want To Be Rich? (8 page)

    

    

    

    
Paris, Geneva - and many other places, from Caracas to Cox's Bazaar. How a sales force was mustered, a technique was refined, and young men learnt to 'put their egos in their pockets'. Also, some observations on Swiss banks.

    One evening in 1958 the doorbell rang in an apartment on one of the drab housing areas attached to the big us Air Force base at Orleans, fifty miles south of Paris. The sergeant who lived there opened the door, to be confronted by a slim, pleasant young American who proceeded to do a very odd thing.

    'Good evening,' he said. 'My name is Allen Cantor, and I would like to introduce you' - he made an assured gesture -'to my colleague Mr W. Thad Lovett.'

    The odd thing about Cantor's introduction was that he was at that moment quite alone outside the door. The reason for this was that Mr W. Thad Lovett, who was by no means a figment of Cantor's imagination, was down below in the car again, shivering with sheer horror at the idea of ringing the doorbells of perfect strangers and intruding upon them for the purpose of selling mutual fund shares.

    Thad Lovett was neither designed by nature, nor prepared by upbringing, for door-to-door selling, least of all to enlisted men in the US Air Force. He is a shy, plumpish man with exquisite manners and a dry sense of humour, who loves music and fives with nine living cats and innumerable china ones. Having inherited what he calls 'an Income' he had knocked about Europe until the age of 45 without having needed to earn a living. Then the Income came dramatically to an end, in the way

    Incomes sometimes do, and there was nothing for it, short of

    going back to America and working in an office, but selling mutual funds for Bernie Cornfeld.

    Allen Cantor's background was very different. His family ran a store in Brooklyn, and after a successful academic career, Allen travelled to Europe and put in a spell as a rare-book dealer.

    While outwardly very different, they were both representative of the superficially unlikely material from which Bernie Cornfeld recruited the IOS Old,Guard.

    Within weeks of arriving in Paris, Cornfeld had made an interesting discovery. He had found that there were at least two types of Americans in Europe. There were the servicemen, who had reasonable quantities of money in their pockets, but who more and more frequently were accompanied by wives and children - which made them increasingly disinclined to blow all their pay on living it up.

    And then there were the exiles. Today, large herds of gentle, conformist rebels against American culture graze anywhere in Europe they can find grass. In 1955, in Paris, Cornfeld was among the vanguard of the invasion. The exiles he met were on the whole highly educated. Many of them had come to Europe as students, on the GI Bill or on Fulbright grants. Theirs was a tolerant society: a mildly bohemian life-style was expected, and some vague stirrings of political radicalism were almost demanded. It was a world of frustrated intellectuals, mild neurotics, political nonconformists and cultural misfits, with the occasional drunk or homosexual. Most American businessmen would have written them off as being hopelessly deficient in acquisitive instincts.

    It was the inspiration of Bernie Cornfeld, the psychologist and social worker, to see that these exiles could be remotivated and put to work selling mutual funds to the servicemen. His success in doing so was so enormous that the originality of his perception has been forgotten. It is hard to imagine any ordinary mutual fund sales boss perceiving commercial talent in Thad Lovett, as Mr Lovett himself admits.

    The fact that his recruits were people who had found that their careers were stumbling, or that they had overestimated their talents, did not dismay him, as it might have dismayed some ibm-trained personnel manager. Indeed, it may well have served some deep need of his own: for it carried the promise that his recruits would become devoted followers of the man who could perform an act of liberation for them. In the beginning, Investors Overseas Services sometimes seemed more like
a
therapeutic community than a money-making device.

    Bernard Cornfeld told
Time
magazine in 1962 that he had started with a capital of $300. It sounds like
a
rags-to-riches beginning, but in fact he began in Europe with most of the things that his new acquaintances were struggling to get: a flat,
a
girl friend (two, by his own account) a sporty little Simca, a typewriter, and a promising source of income in good, green dollars. In Paris, no less than New York, Bernie was the boy who always knew how to get hold of wheels, a girl, a pad and
a
few bucks.

    Cornfeld had brought with him to Paris a rather tenuous relationship with Investors Planning Corporation, and on the basis of this he started, experimentally, selling a few mutual fund shares. He wrote off to the Benedicks for supplies of literature and propectuses, and for a while they kept him supplied. But Cornfeld, now that he had seen the large possibilities of the American expatriate market, decided to become an independent dealer - which would, of course, entitle him to a larger slice of the commission on any sales he could procure. Quite early in 1956, Jack Dreyfus in New York received
a
letter which reminded him of the young man who had dropped in and complimented him upon the readability of the Dreyfus prospectus. Cornfeld wrote that he had been hoping to sell for ipc in Europe, but that the arrangement was not working out as he had hoped. What about the prospects of selling for the Dreyfus Fund?

    The result was that Cornfeld exchanged his links with ipc for a dealership selling the hottest fund in New York. From Jack Dreyfus' viewpoint, his decision to accredit Cornfeld was nearly as good a buy as Polaroid: within three years Cornfeld's European-based sales crew were selling almost sixteen per cent of the fastest growing section of the Dreyfus Fund's new business. This was the category of 'contractual programmes', under which investors agreed to pay a certain amount into the fund every month, instead of putting up a single lump sum. Cornfeld was an early enthusiast for 'contractuals': from a salesman's viewpoint, the great feature was that commission could be calculated upon the total volume of money that the customer would eventually pay during the life of the programme. By 1962, IOS was bringing in close to forty per cent of all the Dreyfus programme business, and 31.1% of all the Dreyfus Fund's new money.

    The salesmen Bernie recruited did not at all resemble the salesmen of legend, or Arthur Miller's imagining. Robert Marx was reasonably representative.

    Like Cornfeld, he had joined the merchant navy around the end of the war. On discharge, he became a reporter, which he saw as an interim period on the way to becoming a novelist. By 1955, he was working for Reuters in Paris, on very slender wages indeed, which he eked out by contributions to an international veterans' journal. In March 1956 he was introduced to a girl friend of Cornfeld's, who suggested that Bernie might be able to provide some supplementary income. Marx trudged up to 22 Boulevard Flandrin, a small white house behind a big block of flats, to meet Bernie.

    'Physically, he was completely unprepossessing,' Marx remembers. 'His clothes were baggy-there was never a suit off the peg which could fit Bernie. But then he started to speak. His voice is very soft, and reassuring. His smile is very engaging.

    ‘I didn't at all like the idea of selling mutual funds. And he didn't seem to sell the idea very hard. But by the time I left the flat, I had agreed to give it a try.'

    There was nothing elaborate about the operation Marx joined. The firm's chief and almost only asset was a Chrysler Imperial convertible, which has become firmly established as part of the IOS legend. 'It was the headquarters of the firm, really,' says Marx. 'Each weekend Bernie would load it up with salesmen and sales material, and drive out to Orleans. Sometimes, we would sleep over Saturday night in the car before starting in again on Sunday.' But by the time Marx joined, the firm was on its way to fame. Bernie's advertisement in the Paris
Herald-Tribune,
offering 'American men and women' over $10,000 a year for 'sales ability, a willingness to work hard in a fast-growing industry, and a sense of humour', was running regularly, and striking a very effective chord in the exile community, which prided itself, above all, on its sense of humour.

    Marx's close friend, John Curran, a quiet, bookish journalist, quit rewriting cables for the
Herald-Tribune
and joined up. Lester Hayes was a professional ballroom dancer, who had been working the cruise ships with his wife. Jack Himes had been in the us merchant navy too. Alvin Ostroff had known Bernie in Brooklyn College, and trekked to Europe to join him. Berton Cantor (not to be confused with Allen Cantor) had been studying at the London School of Economics on a Fulbright grant: before that he had been a newspaperman in Chicago. Gladis Solomon was the first woman aboard, den-mother of the crowd. Her previous trade had been reading your character from the way you drew a horse.

    Victor Herbert joined in characteristic circumstances. He had been bouncing around Europe since 1949, making a living by purchasing rare music and musical manuscripts for an antiquarian bookshop in New York. By 1956, Herbert had reluctantly acknowledged that there was no real future in what he was doing.

    The prospect of going back to Chicago appalled him, but although Herbert had met Cornfeld, he did not care for the idea of selling mutual funds. By way of a reprieve, before the trek home, Herbert decided to take a holiday with a friend who knew Enrol Flynn, on a yacht moored off the Algerian coast, and he spent a memorable fortnight of Mediterranean pleasures in his company. Under the influence of sea and sun, Herbert decided that
anything
was better than going back to Chicago. He went back to Paris, and looked up Cornfeld. Bernie asked him only one question:

    'Do you want to start selling tonight, or tomorrow?'

    Despite his lack of initial pleasure at the idea of selling mutual funds, Herbert found Cornfeld as impressive as did Marx. Especially, he was impressed by Bernie's account of 'dollar-cost averaging'. The use of this piece of arithmetical patter reveals a great deal about the essential techniques of mutual fund selling. The standard sales pitch is predicated upon the idea that stock markets everywhere are set upon an upward course. Get your money in now, the customer is exhorted - before prices rise even higher.

    From time to time, however, stock markets actually do fall. What to say now? Well, when stocks are going
down,
then it's an even better time to buy. Suppose shares are worth buying at 1oo. If the market drops, they must still be worth buying - but for the same amount of money, you can buy even more of them. You get better value for money! The flaw, of course, is that some shares may fall and never rise again. But in 1956, Herbert was hardly alone in being impressed by this magical calculus.

    Still, Herbert wanted to know a little more about what was involved in selling for IOS. Cornfeld brushed aside. 'Let me tell you about the opposition,' he said. 'There's one guy who smokes big cigars, and another guy who wears big cufflinks.' What he meant was that the other enterprising fellows who had seen the potential of the military market were out to make themselves rich fast. He, Cornfeld, had a more enlightened self-interest in view. He proposed to make the salesmen rich along with himself.

    'He said he would make us all millionaires,' says Herbert, a by no means uncritical admirer in later years, 'and he did.'

    Bernie might never have b
een able to implement that promise without the intervention of Charles de Gaulle. Any American organization as brash as Bernie's was an automatic victim of the change of mood after his return to power in May 1958. Almost inevitably, the infant IOS did things which were sinful in the eyes of Gaullist officials. American mutual funds were a new and puzzling phenomenon: the French authorities entertained dark suspicions that IOS was selling fund shares to French citizens, and they suddenly raided the mail at one of the
ornfeld's office and trying to sell to Cornfeld. After each such exercise, they would sit down together and go through the flaws in the new salesman's 'presentation'. There were lengthy group sessions, where Bernie and his men picked over the techniques of their craft. They practised 'sincere smiles' in front of mirrors - in later, more opulent days, training films were made on the finer points of smiling - and they practised 'firm handshakes' on each other. Cornfeld impressed upon them that they should always try to sit next to a prospect, rather than across the table from him, where it would be harder to 'win his confidence'. He was assiduous in explaining the delicacy required when talking about a man leaving investments to his family. They should always say 'if