"Does anyone know what a CMO is?" Silence in the room. It was the morning sales meeting at the Investment Firm. We were in the Retail Division, all newly anointed Financial Consultants, the latest term for a stockbroker. A young voice in the back of the room spoke up, "It's just like a CD, but it pays more."
This was greeted with laughter from throughout the room, though management at the front of the room was trying to figure out why this wasn't an appropriate answer. It was in the early days of financial derivatives and CMOs were one of the first versions of mortgage-backed securities that eventually led to the collapse of the US economy in 2008.
The investment business, at least on the retail side, is one of those worlds in which the opposite of what is being said is usually true. In this case, if a CD was the most risk-free place to place one's money, a CMO was arguably the most risky. However, the subsequent explanation of a CMO by management, with its various tranches and default risk pools, was entirely too complicated to understand, much less explain to Mrs. McGillicutty on the phone. So, to that extent, the explanation from the back of the room was probably as good as any.
This was the operating strategy of the Investment Firm at the branch level. Under the guise of being a financial consultant, the goal was to sell as many financial products as possible, preferably those with the highest sales charge. At least, that's what the street smart brokers understood, those that had come from selling TVs, appliances, or cars previously.
I was fundamentally a fish out of water. One day I received a call asking if I would like to join the firm. It was during a recession and work as an architect was starting to be even less rewarding than in good times. A friend of mine joined the Investment Firm years earlier, and that's probably how they knew about me. In any case, without hesitation, I said yes.
When they brought me in they had me sit for a psychological test. The idea was to test your competitive ability as a salesperson. I answered all the questions honestly and when the results came back I received a two out of a hundred. This can't be right they insisted. They knew that I had been an academic, having taught at Harvard and MIT. Was I trying to game the test, break it somehow, they asked. No, I said, so they had me take the test again.
This time I paid more attention to the questions, seeking out what I now knew was probably the preferable answer to some of the questions. For example:
Question: Would you shove your grandmother down a flight of stairs to make $5 more on a sale?
Preferred answer: yes
Not really, but then only thinly disguised from the above in the way that such tests are designed to uncover the particular sociopathic character traits desired. This time the results came back. I scored a 98%. You would think this would have been enough to clarify what I had gotten myself into, but it was all so fascinating.
I just kept going…