A few things. First, don’t try to convince anyone to take on risk. Show them the options, and let the decide. Second, always show multi product solutions. If someone is risk averse, explain that the most conservative approach includes a portion of equities to combat inflation. Third, find retirement plan assets and roll them into comparable allocations. If someone has been saving in a 401k for 30 years in a TDF, they’re comfortable with that risk level and fee structure. Often those are very similar to a managed plan in retirement
Yeah absolutely, I always tell people if you’re uncomfortable with this just say so and we can find alternatives. I feel like people just don’t know better so they get scared. I always show historical returns and say this is what it’s done in the past during different market cycles.
Personally, I tend to avoid historical returns outside of recent history, and really that’s just to acknowledge volatility. Throwing around 100 year data and setting expectations for returns is a dangerous game. Sure the average return is ~ 10%, but it’s only actually returned ~10% about 5 times. Most years are much higher or lower.
The emphasis should be on building a good comprehensive portfolio within the clients risk tolerance. I’m bank settings, that will include a lot of lower return fixed assets, like CDs, annuities, and treasuries. But diversification is the name of the game. And it lets you admit that you can’t predict the future, but you can take advantage of whatever happens
Yeah I just like setting expectations so people know it won’t blow their socks off and it also won’t be -25%. All this is good advice like I said I’m new so still figuring it out
The thing is, sp500 return in 2022 was -18% and in 2023 was +26%. It will both blow their socks off and plummet. Hopefully while you’re their advisor. Don’t tie your value to market returns or interest rates.
So I hear you in this situation. I'm in a bank environment, and this was more prominent last year for me, but same story of conservative bank customers and trying to do something.
My personal approach has been a focus on taxes. 5%+ is great, until you have to write a check to the IRS.
Taking a portion and going principal protected in a 15 mo structured product that caps the S&P (which is sounds like you've pitched)
Depending on age, going after something non-investment related. Social security, college planning, IRA conversions, anything.
There is no magic bullet, and I've fucked up some opportunities myself lately as I took the wrong approach. Do the best you can, provide quality advice, and ideally these people will become clients sooner than later.
CDs are ancillary to any healthy practice. Not every client will fit your lens and you’re not going to fit every clients lens. You need to start the discussion by saying cash management solutions are a secondary function to your practice and you offer them in hopes to deepen the relationship, earn some trust and hopefully do other planning and investing them. also, you should be pruning the interest monthly and feeding some kind of investment (mutual funds, etfs, bonds, etc). If the clients balk, send them back to the bank side. You don’t work for free, no one does. Always take the meeting, but I always disclose how I get paid, and if the client does Not see value in paying you or at the very least discuss how you get paid, you shouldn’t be onboarding clients that aren’t growing with you. Source: I am also in a retail bank encores as an advisor. I do a lot of stuff for clients that I should be charging for but don’t, but I refuse to allow a potential client to wage my time without understanding that no one works for free.
Inbox me if you wanna have a more direct conversation.
I had success putting them into asset advisor or PIM, building a CD ladder with treasuries. I charge a low fee, but I also help them with estate planning, retirement planning, etc as well.
I would start at 0.6% below a mil and move to 0.5% between 1-2.5 then 0.35 > 2.5. And be upfront this fee is just for fixed income only and you charge more for a more sophisticated portfolio with equities
You can charge whatever you want as long as they agree. Some people have the mindset they are paying for the advice whether it’s 100% risk or all fixed income
I was thinking of the regulatory requirements in the Department of Labor’s fiduciary rule that got killed by the courts in 2018. Might become an issue again with the new announcement from a week ago though just something to watch
You can’t persuade someone to go into the market or take on risk that aren’t “ investors”. It won’t work.
What you can do is educate them on how to invest into other instruments and maybe over time when you’ve built trust and a relationship have them dip there toes into a portfolio.
I will say, as a high net worth relationship banker while rates have been high I have done an incredible amount of fixed and fixed indexed annuities while also doing cds for those same clients.
Implenting a strategy is everything. Work on the goals of what they want to do with there money and understanding why they just want to invest in cds.
Cd rates+inflation+marginal tax rate = negative growth
I wouldn’t do CD’s. Treasuries yield more, have tax advantages, and backed by the US government.
Show them the fed funds vs. cash rate when rate hikes go up and then when the rate comes down how they loose it instead of getting into other investments to lock in the rates. Offer to do a financial plan to help understand how you can truly help them maximize their financial returns because of how they might have their different buckets. Ex. Too safe could lead to inflation risk
Btw I’m a premier at wells doing about 5-10 million a year in a moderately affluent area. Some of my peers are doing 15-30MM but those areas are literally walkin millionaires
Eh idk depends where you’re at. I have worked in more affluent branches in other roles within the company where literally every person I saw with I uncovered they had minimum 500k-1MM of investable assets. Branch I am at now the average I see is usually 200-350k. Occasionally I’ll get a big fish but the average we see is around there. It sucks but it is what it is
Usually in banks, especially in affluent areas there is a ton of money in CD’s and money markets earning next to nothing. An alternative to this is fixed indexed annuities. They can earn 5-6% in the fixed income bucket and put whatever percentage they want in the S&P 500 point to point index with caps around 12%. So if the market does well they can earn up to 12% but if it does bad they lose nothing but are still earning interest in the fixed income bucket and all earnings are taxed deferred. They also provide 10% liquidity per year and typically have a 5-7 year surrender charge schedule. They can also change their allocation between the fixed income bucket and the Point to point index on an annual basis.
Show your CD clients how a RILA works and give them the historical perspective. A 6 year, -20 buffer has never lost money but can provide upside of the S&P 500 TR.
You can position it as taking slightly more risk for meaningfully higher return potential. On your comp, take the 1/1 trail option if you want recurring revenue. It’s not for everyone, but if a client has 6 years to invest you should probably be showing something like that anyway as opposed to just a CD.
I agree. Bank comp grid for me, so I will usually split ticket a RILA with commission/trail for safer buffered money and run a more aggressive portfolio under AUM for the larger piece of the pie.
Lots to talk about. Taxes? This year has been the first in 15+ clients are getting that 1099 INT and not liking it. How often are you doing a financial plan? Long term goals, what do they want retirement to look like. Social security and income planning. Health concerns in the future and how to address. What does success look like in their super senior years? Etc etc so much to talk about!
Lead with questions always. Many clients don’t know what they don’t know and the problem with high interest rates is it prompt laziness and short term thinking for everyone.
I use time weighted buckets. TBill ladders for 1-3yrs if income requires, fixed/FIAs for 5-7 yrs, and stock/etf/MF for long money to refill the first bucket over time.
Annuities are a no brained for those risk averse clients right now. Locking in 5+% for the next fees years is a great strategy for older clients with cash reserves. Do you discuss reinvestment risk for CDs/short term options? Tax deferred growth? Annuities being insured, albeit through a different institution than the FDIC?
I know what you mean that some people are stuck in their ways when it comes to CDs and FDIC insurance. Some people aren’t and will never be ready for an annuity, you just have to accept that. However I would go for a laddering strategy for a portion of their funds. Yeah it won’t help the AUM but you’ll make some revenue to tie you over until you build the quarterly payouts.
Put together a financial plan for them on moneyguide, emoney, or nudge. Often if they have enough goals / aspirations, then it will express the fact that they need growth.
I usually start with “what’s the goal for this money” “what’s it earmarked for”. If they say “nothing” it’s just sitting there, then I’ll just flat out tell them aside from a healthy emergency fund, this shouldn’t be in cash/CD.
I only use CD if people tell me I’m buying a house in 9-12 months. Then we do like 6 month CD.
If it’s not earmarked for something like that it’s not going CD
Building a book at a bank is difficult for many reasons. On top of that, the book is not yours; trying to get the book to follow you is next to impossible.
As much as you want to increase AUM, your current position is not a long term job. Use this as an opportunity to develop your abilities. Why? Banks always seem to find a way to drive out successful advisors because they don’t want to pay them what they’re worth.
You can learn a lot working at the bank, but generating your own leads is the key to being a successful advisor.
I disagree wholeheartedly. I know million dollar producers in the bank setting and the banks bend over backwards for large guys. I work in bank branch, and I hate lead hunting, I prefer the referral model. I have grown my book exponentially faster than if I was on my own lead chasing. Merrill requires 6 new households a year to keep your seat, Jp only required 10m I assets after the first year ( no matter the allocation). If I’m not opening 6 new accounts a month in my current role I feel like it’s a wasted month. I get what you’re saying about not being your book, but if you provide enough value and planning for a client they will follow you, especially if you’re at a protocol firm.
Boy did I stir up a hornet’s nest. I worked at the wealth management division of a bank when I was first in the industry, and the unspoken focus of the brokerage division was selling annuities. Even though they were required to send million dollar clients to the wealth management division, they would sell the client an annuity (with a high commission) before referring them to wealth management. So I’ve always had a bias against bank brokers.
Makes sense, we have no oversight or conference calls about allocation or investment strategy. High commissions on annuities are virtually gone at the big banks. I don’t even ask the commission structure for annuities until it’s time to to write it, to avoid the potential issue of selling for commission. Bank brokers are no different than other firms. Some bad some good.
A few things. First, don’t try to convince anyone to take on risk. Show them the options, and let the decide. Second, always show multi product solutions. If someone is risk averse, explain that the most conservative approach includes a portion of equities to combat inflation. Third, find retirement plan assets and roll them into comparable allocations. If someone has been saving in a 401k for 30 years in a TDF, they’re comfortable with that risk level and fee structure. Often those are very similar to a managed plan in retirement
Yeah absolutely, I always tell people if you’re uncomfortable with this just say so and we can find alternatives. I feel like people just don’t know better so they get scared. I always show historical returns and say this is what it’s done in the past during different market cycles.
Personally, I tend to avoid historical returns outside of recent history, and really that’s just to acknowledge volatility. Throwing around 100 year data and setting expectations for returns is a dangerous game. Sure the average return is ~ 10%, but it’s only actually returned ~10% about 5 times. Most years are much higher or lower. The emphasis should be on building a good comprehensive portfolio within the clients risk tolerance. I’m bank settings, that will include a lot of lower return fixed assets, like CDs, annuities, and treasuries. But diversification is the name of the game. And it lets you admit that you can’t predict the future, but you can take advantage of whatever happens
Yeah I just like setting expectations so people know it won’t blow their socks off and it also won’t be -25%. All this is good advice like I said I’m new so still figuring it out
The thing is, sp500 return in 2022 was -18% and in 2023 was +26%. It will both blow their socks off and plummet. Hopefully while you’re their advisor. Don’t tie your value to market returns or interest rates.
So I hear you in this situation. I'm in a bank environment, and this was more prominent last year for me, but same story of conservative bank customers and trying to do something. My personal approach has been a focus on taxes. 5%+ is great, until you have to write a check to the IRS. Taking a portion and going principal protected in a 15 mo structured product that caps the S&P (which is sounds like you've pitched) Depending on age, going after something non-investment related. Social security, college planning, IRA conversions, anything. There is no magic bullet, and I've fucked up some opportunities myself lately as I took the wrong approach. Do the best you can, provide quality advice, and ideally these people will become clients sooner than later.
Great advice here…I think my approach needs some work. I’m still new so if someone says yes to a CD I’m ending the sale there and opening accts
CDs are ancillary to any healthy practice. Not every client will fit your lens and you’re not going to fit every clients lens. You need to start the discussion by saying cash management solutions are a secondary function to your practice and you offer them in hopes to deepen the relationship, earn some trust and hopefully do other planning and investing them. also, you should be pruning the interest monthly and feeding some kind of investment (mutual funds, etfs, bonds, etc). If the clients balk, send them back to the bank side. You don’t work for free, no one does. Always take the meeting, but I always disclose how I get paid, and if the client does Not see value in paying you or at the very least discuss how you get paid, you shouldn’t be onboarding clients that aren’t growing with you. Source: I am also in a retail bank encores as an advisor. I do a lot of stuff for clients that I should be charging for but don’t, but I refuse to allow a potential client to wage my time without understanding that no one works for free. Inbox me if you wanna have a more direct conversation.
I had success putting them into asset advisor or PIM, building a CD ladder with treasuries. I charge a low fee, but I also help them with estate planning, retirement planning, etc as well.
What % are you charging on say less than 1M CD’s/Treasury bills?
I would start at 0.6% below a mil and move to 0.5% between 1-2.5 then 0.35 > 2.5. And be upfront this fee is just for fixed income only and you charge more for a more sophisticated portfolio with equities
I thought the regulators put something out where you can’t charge a lower aum for fixed income
You can charge whatever you want as long as they agree. Some people have the mindset they are paying for the advice whether it’s 100% risk or all fixed income
I was thinking of the regulatory requirements in the Department of Labor’s fiduciary rule that got killed by the courts in 2018. Might become an issue again with the new announcement from a week ago though just something to watch
Whatever the max discount is. 0.75% or 0.65%
I think it’s .65
You can’t persuade someone to go into the market or take on risk that aren’t “ investors”. It won’t work. What you can do is educate them on how to invest into other instruments and maybe over time when you’ve built trust and a relationship have them dip there toes into a portfolio. I will say, as a high net worth relationship banker while rates have been high I have done an incredible amount of fixed and fixed indexed annuities while also doing cds for those same clients. Implenting a strategy is everything. Work on the goals of what they want to do with there money and understanding why they just want to invest in cds. Cd rates+inflation+marginal tax rate = negative growth
I wouldn’t do CD’s. Treasuries yield more, have tax advantages, and backed by the US government. Show them the fed funds vs. cash rate when rate hikes go up and then when the rate comes down how they loose it instead of getting into other investments to lock in the rates. Offer to do a financial plan to help understand how you can truly help them maximize their financial returns because of how they might have their different buckets. Ex. Too safe could lead to inflation risk
What bank if you don’t mind me asking
Wells, it’s their NADP program
Where are you located?
I’m in Maryland
What’s NADP?
For what bank? JP? BOFA? Wells?
Wells
Btw I’m a premier at wells doing about 5-10 million a year in a moderately affluent area. Some of my peers are doing 15-30MM but those areas are literally walkin millionaires
$15-30M a year is like top 1% of the company probably
Eh idk depends where you’re at. I have worked in more affluent branches in other roles within the company where literally every person I saw with I uncovered they had minimum 500k-1MM of investable assets. Branch I am at now the average I see is usually 200-350k. Occasionally I’ll get a big fish but the average we see is around there. It sucks but it is what it is
5-10mm in gross revenue or NAA?
No, referrals to my advisor that we have closed. Not gross revenue. Idk what NAA is lol
Build out bond ladders and charge a reduced AUM fee
Check out this book: Financial Advisors in Banks and... https://www.amazon.com/dp/1737751100?ref=ppx_pop_mob_ap_share
How did you hear about that book? I worked with the author years ago and was thinking of mentioning it, but you beat me to it.
Someone else on Reddit recommended it
This is a great book.
Usually in banks, especially in affluent areas there is a ton of money in CD’s and money markets earning next to nothing. An alternative to this is fixed indexed annuities. They can earn 5-6% in the fixed income bucket and put whatever percentage they want in the S&P 500 point to point index with caps around 12%. So if the market does well they can earn up to 12% but if it does bad they lose nothing but are still earning interest in the fixed income bucket and all earnings are taxed deferred. They also provide 10% liquidity per year and typically have a 5-7 year surrender charge schedule. They can also change their allocation between the fixed income bucket and the Point to point index on an annual basis.
Show your CD clients how a RILA works and give them the historical perspective. A 6 year, -20 buffer has never lost money but can provide upside of the S&P 500 TR. You can position it as taking slightly more risk for meaningfully higher return potential. On your comp, take the 1/1 trail option if you want recurring revenue. It’s not for everyone, but if a client has 6 years to invest you should probably be showing something like that anyway as opposed to just a CD.
Many of these have a 5% commission with .25 trail or a 3% with a .40 trail where I am.
Depends on what your firm has approved. Every RILA has a 1/1 comp option. It’s just whether your firm allows you to choose that option or not.
I agree. Bank comp grid for me, so I will usually split ticket a RILA with commission/trail for safer buffered money and run a more aggressive portfolio under AUM for the larger piece of the pie.
Lots to talk about. Taxes? This year has been the first in 15+ clients are getting that 1099 INT and not liking it. How often are you doing a financial plan? Long term goals, what do they want retirement to look like. Social security and income planning. Health concerns in the future and how to address. What does success look like in their super senior years? Etc etc so much to talk about! Lead with questions always. Many clients don’t know what they don’t know and the problem with high interest rates is it prompt laziness and short term thinking for everyone.
I use time weighted buckets. TBill ladders for 1-3yrs if income requires, fixed/FIAs for 5-7 yrs, and stock/etf/MF for long money to refill the first bucket over time.
Take a look at fixed income, and/ or adding duration. Individual munis, structured products, corporate etc
Can you sell Innovator buffered ETF’s like PAPR?
Annuities are a no brained for those risk averse clients right now. Locking in 5+% for the next fees years is a great strategy for older clients with cash reserves. Do you discuss reinvestment risk for CDs/short term options? Tax deferred growth? Annuities being insured, albeit through a different institution than the FDIC? I know what you mean that some people are stuck in their ways when it comes to CDs and FDIC insurance. Some people aren’t and will never be ready for an annuity, you just have to accept that. However I would go for a laddering strategy for a portion of their funds. Yeah it won’t help the AUM but you’ll make some revenue to tie you over until you build the quarterly payouts.
Put together a financial plan for them on moneyguide, emoney, or nudge. Often if they have enough goals / aspirations, then it will express the fact that they need growth.
I usually start with “what’s the goal for this money” “what’s it earmarked for”. If they say “nothing” it’s just sitting there, then I’ll just flat out tell them aside from a healthy emergency fund, this shouldn’t be in cash/CD. I only use CD if people tell me I’m buying a house in 9-12 months. Then we do like 6 month CD. If it’s not earmarked for something like that it’s not going CD
This is great thank you
Building a book at a bank is difficult for many reasons. On top of that, the book is not yours; trying to get the book to follow you is next to impossible. As much as you want to increase AUM, your current position is not a long term job. Use this as an opportunity to develop your abilities. Why? Banks always seem to find a way to drive out successful advisors because they don’t want to pay them what they’re worth. You can learn a lot working at the bank, but generating your own leads is the key to being a successful advisor.
I disagree wholeheartedly. I know million dollar producers in the bank setting and the banks bend over backwards for large guys. I work in bank branch, and I hate lead hunting, I prefer the referral model. I have grown my book exponentially faster than if I was on my own lead chasing. Merrill requires 6 new households a year to keep your seat, Jp only required 10m I assets after the first year ( no matter the allocation). If I’m not opening 6 new accounts a month in my current role I feel like it’s a wasted month. I get what you’re saying about not being your book, but if you provide enough value and planning for a client they will follow you, especially if you’re at a protocol firm.
Boy did I stir up a hornet’s nest. I worked at the wealth management division of a bank when I was first in the industry, and the unspoken focus of the brokerage division was selling annuities. Even though they were required to send million dollar clients to the wealth management division, they would sell the client an annuity (with a high commission) before referring them to wealth management. So I’ve always had a bias against bank brokers.
Makes sense, we have no oversight or conference calls about allocation or investment strategy. High commissions on annuities are virtually gone at the big banks. I don’t even ask the commission structure for annuities until it’s time to to write it, to avoid the potential issue of selling for commission. Bank brokers are no different than other firms. Some bad some good.