Banking houses recruit their force of sales men from various sources. Sometimes the men have been successful in selling of other kinds and have looked to the investment banking business as of a higher grade. They may come from almost any other occupa tion. The tendency in recent years has been for a house to train its own salesmen and for the most part to recruit its apprentices from recent graduates of colleges. It will take such young men into its offices, giving them a little guidance to sources of infor mation about corporations and investment banking matters. Occasionally the manager or office employees of the house will set them to some office task. Though some houses give them a measure of regular instruction, for the most part they leave them a good deal to their own resources to acquire an under standing of what is going on about them and a knowledge of securities. Some houses will not keep them at this for more than three months before letting them go out of the office to make their first efforts at selling; other houses will keep them in the office for two or three years. They are essentially in the position of students during this period and receive only nominal compensation for nominal services. The difference in the time of this part of the apprenticeship required by different houses depends on varying ideas about the minimum of financial matters a man ought to know before he should be per mitted to approach a possible and prospec tive client.
Though the banking house picks these young men with an eye to their probable capacity for the work they are to undertake, the employer finds it difficult to say which of those be has chosen will succeed in selling and which will fail. When they are per mitted to go out and seek the capitalist face to face, they have a difficult task ahead of them. Naturally the house does not entrust them during this apprentice period with any well-developed territory. So they must for the most part first discover the capitalist. They will not have any great difficulty in identifying the capitalists in the smaller communities and in securing at least a brief interview with them. But competitors find it equally easy to learn of the capitalist mem bers of the small communities and to gain access to them. In the larger communities the problem of finding the capitalists at all is much harder. Since the number of sub stantial capitalists in any community is necessarily a small percentage of the inhabi tants, a canvass of the entire population is obviously impracticable. To describe some of the many devices to locate them would extend this discussion unduly.
The reader will, of course, see that not all capitalists are available material for the se curities salesmen to work on. Most men owning, and actively engaged in, their own business use all their capital in it. Of active business men only those who have a surplus to invest outside of their own business can take any part in furnishing funds to those corporations which look to the general in vesting public for supplying their capital account. Those business men who do have surplus funds for investment, and those capi talists who are not actively engaged in a business of their own, may not invest all or any of their capital in the financing of cor porations. Ownership and improvement of
real estate require financing as well as cor porate enterprises. A large proportion of capitalists with surplus funds, on which they do not want to accept the risk of unprotected ownership, invest in ordinary realty mort gages,—rural mortgages if they live in the country, or in close association with the country, and urban mortgages if they live in the city.
Under most circumstances it is natural for the man with surplus funds to turn first to the ordinary real estate mortgage for in vestment. It offers the simplest form of security. Though some people begin to sus pect that investment in real estate mortgages is a more complex matter and more worthy of analysis than investors have commonly thought, involving, as it does, the whole problem of shifting realty values and eco nomic rent, on the surface it is much simpler than what, to the novice in investment, is the labyrinth of corporate securities, with their finely differentiated gradations of risk, income, and control and all the intricacies of business income. Moreover, people who invest in mortgages for the most part invest locally. They can see the tangible property in which their funds are invested. The mat ter has a degree of reality about it which an investment represented by a piece of cor poration paper does not possess. All these considerations incline the man getting his first experience in investing to select the or dinary real estate mortgage. Many capi talists all their lives adhere exclusively to this form of investment.
So our young bond salesman will find that he not only has the task of finding capital ists, but of finding that selection of inves tors among the class of capitalists whom he can interest in financing corporations. When he has found a man whom he knows to be an investor, and whom he knows as willing to consider an investment in corporation se curities, he has only begun his selling task. Only the very wealthiest of capitalists are wealthy enough to have funds to invest at almost any time. Our salesman must, in the first place, command the confidence of the capitalist. A reasonably cautious man does not invest a thousand dollars or more through an entire stranger. Our salesman cannot reasonably expect to do business un til the capitalist feels acquainted with him and has formed a good opinion of him. Even though the capitalist may be thoroughly familiar with the name of the banking house which the salesman represents, and knows that it is a house of the highest reputation, he will still want to feel personally well ac quainted with the salesman. Investing is too intimate a business to transact with, or through, a stranger. After the salesman and the capitalist have reached the degree of acquaintanceship at which the capitalist is willing to make an investment through the salesman, our young man may still have to wait a long time before the capitalist is in funds and ready to invest. So our young salesman will not be likely to put through many transactions during his first few months of work in the endeavor.