Getting paid...clients AND brokers

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Jun 19, 2006 2:22 pm

Anybody have any GOOD ideas on shorter term fixed income ideas THAT YOU CAN ACTUALLY MAKE MONEY ON???


Something other than money market, brokered CD's (which I will not sell ever), etc etc.  Looking for fixed rates ABOVE 5% on 12 months or less.


Does it exist right now???

Jun 19, 2006 4:18 pm

You can sell some investment grade corporates that pay a sliver over 5.50%, mature in about 12 months and still get paid.

Jun 19, 2006 4:25 pm

Well, I sold some Freddie Mac new issue 8 month at 5.35% this week.


Folks in my area that I am looking for this stuff for tend to be pretty conservative, so it's hard to get them into anything unless it's insured or gov't issued/backed (implicitly or explicity).


Are you buying them off the secondary market or new?

Jun 19, 2006 4:27 pm

LOL, the Freddie Mac issue had a whole 10 cents per bond built in!!



I did see a 1 yr non callable, 6.5 yr FHLB new issue at 6%.  Paid $5/bond to grid...not bad, a lot of folks would be very happy with 6%.

Jun 19, 2006 8:13 pm

The best thing you can do for those clients is put them into a wrap account, start off bond trading for them (ladder strategy works well), and annuitize your business. 


And you are making a mistake by not doing CD's.  Some of my best clients originated by taking the time to get them a better rate then my bank was offering...gaining their trust, and then gathering all of their assets.  It really required zero effort on your part.  If you review with them at CD renewal and you think it is going nowhere, just refer them back to the bank.  I have one client that I did a 10k cd with me, totally unaware that we could broker CD's.  He now has 1mil with me in a mutual fund wrap program paying 1.5% annually....that's 15k annuitized revenue.  100 of those clients, well, do the math    

Jun 20, 2006 6:53 am

I have been using some limited maturity SMA's.  I am getting
around 5% in yield, but if you look at what the net historical
performance in times when the FED stops increasing short rates you see
a pop in value to the tune of 8% to 12%.  There have been no down
years in the two I am using.  I am getting 87bp's in fee's after
discounts.  

Jun 20, 2006 9:44 am

Rightway,


I use an short term SMA for one of my large clients, a builder, and it is a great account for him.


$2,000,000 account in 3-6 month corporates, and he's getting an overall yield of 5 5/8ths.  Money is as good as liquid (and it has to be).


BUT...I split 40 bps between me and the SMA...20 bps to my grid ain't much even on $2,000,000.


Thanks for the replies.

Jun 20, 2006 9:50 am
bankwannabe:

The best thing you can do for those clients is put them into a wrap account, start off bond trading for them (ladder strategy works well), and annuitize your business. 


No offense, but why IN THE WORLD would you ladder someone in a FLAT YIELD environment???  Makes no sense to me. 


And you are making a mistake by not doing CD's.  Some of my best clients originated by taking the time to get them a better rate then my bank was offering...gaining their trust, and then gathering all of their assets.  It really required zero effort on your part.  If you review with them at CD renewal and you think it is going nowhere, just refer them back to the bank.  I have one client that I did a 10k cd with me, totally unaware that we could broker CD's.  He now has 1mil with me in a mutual fund wrap program paying 1.5% annually....that's 15k annuitized revenue.  100 of those clients, well, do the math    


Well, for every one of those folks, you'll get 50 "hot money" rate shoppers...and with ticket charges, we as a program don't even BREAK EVEN on a short term brokered CD until we hit the $100,000 mark.  It's a waste of time.

Jun 20, 2006 9:54 am

Not to mention dealing with the inevitable brokered CD call:


Bank CD customer:  "I thought this here CD was FDIC insured...why is it losing money."


Me:  "Well ma'am, it isn't.  It is simply reflecting the secondary market price if you were to redeem it early.  Just hold it to maturity and it won't matter."


This happens with some folks REGARDLESS of how well you prep a client. 

Jun 20, 2006 11:31 am

cd's should be discontinued as an investment until they put more s/c

Jun 20, 2006 11:49 am

Agreed.