Call Script for CDs

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Jan 31, 2007 12:16 pm

[quote=AllREIT]I'm sure that spiel works on clients who don't understand how banks operate.

However it is sort of obvious why banks don't own CD's, it's because they are in the business of earning a spread on deposits and risk free assets don't generate much NIM. So the difference is CD rates vs Corp bond rates.

At current rate's CD's are an excellent thing to call with, and you do get paid for them. I'd much rather sell a CD, than a closed end fund which is 10-1 going to trade a discount to NAV in ten months. If you lose clients money, you will lose clients.
[/quote]

Well said.

Here's a question...if I get people on board as CD clients, how do I develop that into actual business once the CD comes up?

Jan 31, 2007 12:54 pm

[quote=AllREIT] I’m sure that spiel works on clients who don’t

understand how banks operate.



However it is sort of obvious why banks don’t own CD’s, it’s because

they are in the business of earning a spread on deposits and risk free

assets don’t generate much NIM. So the difference is CD rates vs Corp

bond rates.



At current rate’s CD’s are an excellent thing to call with, and you do

get paid for them. I’d much rather sell a CD, than a closed end fund

which is 10-1 going to trade a discount to NAV in ten months. If you

lose clients money, you will lose clients.



[/quote]



Whether they understand how banks work or not is immaterial. You said

it yourself…these vehicles don’t earn much. That, in a nutshell, is the

reason for NOT using CDs.

Jan 31, 2007 2:44 pm

[quote=Starka] [quote=AllREIT] I’m sure that spiel works on clients who don’t

understand how banks operate.



However it is sort of obvious why banks don’t own CD’s, it’s because

they are in the business of earning a spread on deposits and risk free

assets don’t generate much NIM. So the difference is CD rates vs Corp

bond rates.



At current rate’s CD’s are an excellent thing to call with, and you do

get paid for them. I’d much rather sell a CD, than a closed end fund

which is 10-1 going to trade a discount to NAV in ten months. If you

lose clients money, you will lose clients.



[/quote]



Whether they understand how banks work or not is immaterial. You said

it yourself…these vehicles don’t earn much. That, in a nutshell, is the

reason for NOT using CDs.[/quote]

I think what this all comes down to is whether or not one wants to use the CD’s as a “loss leader” to gather assets, open accounts, and get to know the client better.

Some folks-myself included-are not inclined to spend the time on a product that essentially pays them nothing.  In fact, I think on many indy platforms if you make too small a CD trade it could literally COST you to open the account.  (i.e. Ticket charges exceed the commish).

There’s also the question whether or not marketing CD’s are going to attract the kind of person who-long term-won’t really make a very good client anyway.

Jan 31, 2007 5:12 pm

[quote=wlooney]

My firm does does underwrite IPOs, but I'm looking for something guaranteed that can get me in the door.  My strategy with CDs (and don't worry, pitching CDs isn't high on my list of strategies in my business plan) is exactly that which blarmston stated.  Gathering assets and staying in the program #1, then mining for other assets, developing relationships, bridging to other products, and asking for referrals.  If I can develop a few relationships with conservative investors at or near retirement, I'd imagine they will have friends who might need to rollover their 401(k) soon, possibly into an annuity.  I'll let you know how it goes.

[quote=maybeeeeeeee]

YOU can't get paid on CDs so why call on them.

Try IPOs, that is if your firm underwrites them.

[/quote] [/quote]

Selling PRODUCT is never a good idea.

Jan 31, 2007 6:40 pm

[quote=vbrainy] 

Selling PRODUCT is never a good idea.

[/quote]

Gotta totally disagree with this.

Jan 31, 2007 7:10 pm

I disagree as well.

So tell us Vbrain- what is your approach?

Jan 31, 2007 10:37 pm

[quote=BondGuy]

NYSE symbol for the new Eaton Vance fund is EXG.[/quote]

Now that ETY and AOD have hoovered up over $6 billion, how much more addressable assets are left?

Jan 31, 2007 10:42 pm

[quote=entrylevelFA]

[quote=AllREIT]I’m sure that spiel works on clients who don’t understand how banks operate.

However
it is sort of obvious why banks don’t own CD’s, it’s because they are
in the business of earning a spread on deposits and risk free assets
don’t generate much NIM. So the difference is CD rates vs Corp bond
rates.

At current rate’s CD’s are an excellent thing to call
with, and you do get paid for them. I’d much rather sell a CD, than a
closed end fund which is 10-1 going to trade a discount to NAV in ten
months. If you lose clients money, you will lose clients.
[/quote]

Well said.

Here's a question...if I get people on board as CD clients, how do I develop that into actual business once the CD comes up?

[/quote]

You sell people short CD's to begin with. When the CD comes up you offer people another CD, and segue in to talking about their total financial situation. You try to close on a personal meeting.

If you use Mainstay funds, check out thier LifeFolio program, that works pretty well.

Usually, this can be a good time to sell people muni bonds/munibond funds if they are in the right tax bracket.
Feb 1, 2007 3:35 pm

[quote=entrylevelFA]

[quote=AllREIT]I'm sure that spiel works on clients who don't understand how banks operate.

However it is sort of obvious why banks don't own CD's, it's because they are in the business of earning a spread on deposits and risk free assets don't generate much NIM. So the difference is CD rates vs Corp bond rates.

At current rate's CD's are an excellent thing to call with, and you do get paid for them. I'd much rather sell a CD, than a closed end fund which is 10-1 going to trade a discount to NAV in ten months. If you lose clients money, you will lose clients.
[/quote]

Well said.

Here's a question...if I get people on board as CD clients, how do I develop that into actual business once the CD comes up?

[/quote]

You don't. CD buyers tend to be CD buyers.

Feb 2, 2007 3:04 pm

[quote=wlooney]

Yes Bondguy, thanks again...that has been pushed down my throat plenty over the last few weeks.  We are one of the underwriters.  I just want to ALSO sell CDs to gather assets and build relationships.  Maybe I am taking this response the wrong way (and if I am let me know) but why are half the people in here so against selling CDs?  We kill any interest rate I have seen. 

[quote=BondGuy]

NYSE symbol for the new Eaton Vance fund is EXG.

[/quote] [/quote]

In my experience yield sells. Or it at least gets the prospect's attention. Thus leading with EXG at 9.5%. That said, I see nothing wrong with leading with CDs if that's the way you want to go. It's important to use the bake time on whatever CDs you use to build a relationship to penetrate the account. Otherwise you end up with nothing more than a PIA CD buyer. Little income for you and lots of aggrevation. Some good points on this have been posted.

A word about the closed end fund criticism here. I'm the last person to defend closed end funds. Generally speaking I don't like them. However, no more than a doctor would ignore an entire class of pharmacuticals, I can't ignore an entire class of securities. Nor can I judge the performance of one by the completely unrelated performance of another. That said, the reputation of closed end funds is not totally undeserved. Still, the comment that they will be down in 10 months can be applied to any investment. For that reason it's important that any buyer of these funds be made aware of the risks.

EVs closed end funds have done well, though at this point in the cycle many remain untested. Looking at EV's management on the open end side should add a level of confidence. The current crop of CEF come to market sans the NAV killing leverage that earned the field distain.

A word about leading with product.

I specialize in wealth management through creative fixed income solutions for individuals such as yourself.

That line sounds terrific in a one on one meeting with a willing prospect/referral. On the phone. it's just another caller saying they are the best. It's impact is lost in the electronic haze.

Leading with a product, we are fishing for a certain type of fish. With tax frees, that fish is the wealthy income investor. Who just so happens is exactly the same person who will benefit from my wealth management through creative fixed income solutions specialty. Only difference is I don't pull the specialist card until I have a seat at the table and the client's full attention. Leading with a product gets me a seat at the table. Leading with a service, even a good one, get's a place on the unemployment line.

Feb 2, 2007 6:48 pm

Thanks BondGuy…good input.

Feb 3, 2007 12:54 am

ditto…

Feb 3, 2007 7:14 am

[quote=BondGuy]A word about the closed end fund criticism here. I’m the
last person to defend closed end funds. Generally speaking I don’t like
them. However, no more than a doctor would ignore an entire class of
pharmacuticals, I can’t ignore an entire class of securities. Nor
can I judge the performance of one by the completely unrelated
performance of another.[/quote]

Bondguy, what percent of closed end funds are trading at a discount today? (roughly 93% of them).

How many started trading at a premium to NAV?  (All of them).

Is this really good odds?

[quote]That said, the reputation of closed end funds is not totally undeserved. Still, the comment that they will be down in 10 months can be applied to any investment. For that reason it's important that any buyer of these funds be made aware of the risks. [/quote]

With closed end funds, most of them trade at a discount to NAV within 10 months of the IPO. This is well known and not in dispute.

The reason closed end funds exist is becasue they are very profitable for the managing company (the AUM sticks with you no matter what the expenses or performance) and very profitable for the underwriters and salesforce. It's the same as bad variable annuities or life insurance products.

I wouldn't buy a new CEF with my own money, and I wouldn't buy it with other people's money.

[quote]EVs closed end funds have done well, though at this point in the cycle many remain untested. Looking at EV's management on the open end side should add a level of confidence. The current crop of CEF come to market sans the NAV killing leverage that earned the field distain.[/quote]

The leverage was at most 1/3rd of assets (per the 1940 act). What got CEF's into disdain is the fact they are offered at a premium to NAV, and tend to trade at discount to NAV soon after the IPO. This has very little to do with the quality of management or assets chosen for investment.

The academic community is still unsure why CEF's trade at a discount but the main hypothesis is that the discount tends to converge on the present value of management fee's.

Covered Call CEF's were tried back in the late 1970s and failed for the same reason that they will fail today. The monetisation of upside via covered calls will cause the portfolio NAV to have a "downward ratchet" over time. As the portfolio errodes, the % of the portfolio covered will increase as will leverage to maintain the distributions.

[quote]A word about leading with product.

I specialize in wealth management through creative fixed income solutions for individuals such as yourself.

That line sounds terrific in a one on one meeting with a willing prospect/referral. On the phone. it's just another caller saying they are the best. It's impact is lost in the electronic haze.[/quote]

To paraphrase Goering:



“Whenever I hear the word ‘creative’ I reach for my revolver.”


[quote] Leading with a product, we are fishing for a certain type of fish. With tax frees, that fish is the wealthy income investor. Who just so happens is exactly the same person who will benefit from my wealth management through creative fixed income solutions specialty. Only difference is I don't pull the specialist card until I have a seat at the table and the client's full attention. Leading with a product gets me a seat at the table. Leading with a service, even a good one, get's a place on the unemployment line.[/quote]

Well said.
Feb 3, 2007 5:25 pm

CEF’s trade at a discount because the markets are information efficient.

Doubt me?

Call your local Blackrock or Eaton Vance internal wholesaler, and ask them for an update on the performance and portfolio composition for a CEF you purchased on the IPO a year or two ago.  Listen to the silence. ;-)  Better yet, ask them for something in writing, other than the annual report.  It’s getting better, because at least some of the firms now keep updates on their websites.  But the internals and externals don’t talk about them much because they don’t get PAID any moreonce the offering is done.  If you buy the fund in the open market it doesn’t matter to them one whit.  The EV guy in my old territory used to suddenly become an expert in the (fairly good) past performance of the older offerings about 2 weeks before he was ready to bring a new one.

Still doubtful?  Go to your b/d’s research platform and input the symbol of a few of your CEF holdings, and see how much research info you find.  If there is any, it’s likely to be minimal.  Why?  Well how much to the I-banker’s make after a deal is closed.  ZIPPO!

Yes there are some exceptions to the examples I cite, and it is better now than a few years ago.  But, in general, you just need to FOLLOW THE MONEY!

Feb 3, 2007 11:39 pm

[quote=AllREIT] [quote=BondGuy]

NYSE symbol for the new Eaton Vance fund is EXG.[/quote]

Now that ETY and AOD have hoovered up over $6 billion, how much more addressable assets are left?

[/quote]

Although it comes in Feb, this is March biz for me...anyone else?

Feb 3, 2007 11:42 pm

[quote=AllREIT][quote=BondGuy]A word about the closed end fund criticism here. I’m the last person to defend closed end funds. Generally speaking I don’t like them. However, no more than a doctor would ignore an entire class of pharmacuticals, I can’t ignore an entire class of securities. Nor can I judge the performance of one by the completely unrelated performance of another.[/quote]

Bondguy, what percent of closed end funds are trading at a discount today? (roughly 93% of them).

How many started trading at a premium to NAV?  (All of them).

Is this really good odds?

[quote]That said, the reputation of closed end funds is not totally undeserved. Still, the comment that they will be down in 10 months can be applied to any investment. For that reason it's important that any buyer of these funds be made aware of the risks. [/quote]

With closed end funds, most of them trade at a discount to NAV within 10 months of the IPO. This is well known and not in dispute.

The reason closed end funds exist is becasue they are very profitable for the managing company (the AUM sticks with you no matter what the expenses or performance) and very profitable for the underwriters and salesforce. It's the same as bad variable annuities or life insurance products.

I wouldn't buy a new CEF with my own money, and I wouldn't buy it with other people's money.

[quote]EVs closed end funds have done well, though at this point in the cycle many remain untested. Looking at EV's management on the open end side should add a level of confidence. The current crop of CEF come to market sans the NAV killing leverage that earned the field distain.[/quote]

The leverage was at most 1/3rd of assets (per the 1940 act). What got CEF's into disdain is the fact they are offered at a premium to NAV, and tend to trade at discount to NAV soon after the IPO. This has very little to do with the quality of management or assets chosen for investment.

The academic community is still unsure why CEF's trade at a discount but the main hypothesis is that the discount tends to converge on the present value of management fee's.

Covered Call CEF's were tried back in the late 1970s and failed for the same reason that they will fail today. The monetisation of upside via covered calls will cause the portfolio NAV to have a "downward ratchet" over time. As the portfolio errodes, the % of the portfolio covered will increase as will leverage to maintain the distributions.

[quote]A word about leading with product.

I specialize in wealth management through creative fixed income solutions for individuals such as yourself.

That line sounds terrific in a one on one meeting with a willing prospect/referral. On the phone. it's just another caller saying they are the best. It's impact is lost in the electronic haze.[/quote]

To paraphrase Goering:

"Whenever I hear the word 'creative' I reach for my revolver."


[quote] Leading with a product, we are fishing for a certain type of fish. With tax frees, that fish is the wealthy income investor. Who just so happens is exactly the same person who will benefit from my wealth management through creative fixed income solutions specialty. Only difference is I don't pull the specialist card until I have a seat at the table and the client's full attention. Leading with a product gets me a seat at the table. Leading with a service, even a good one, get's a place on the unemployment line.[/quote]

Well said. [/quote]

NFJ was up 31% in 2006 (including div. reinvest) and it was a lay up to buy in 12/2005.  It's not always about the IPO...

Feb 4, 2007 5:07 am

[quote=NOFX]

NFJ was up 31% in 2006 (including div.
reinvest) and it was a lay up to buy in 12/2005.  It’s not
always about the IPO…

[/quote]



We are talking about selling people new funds at IPO. Not selling them old knocked in CEF’s trading at deep discounts.
Feb 4, 2007 2:28 pm

[quote=AllREIT] [quote=NOFX]

NFJ was up 31% in 2006 (including div. reinvest) and it was a lay up to buy in 12/2005.  It's not always about the IPO...

[/quote]

We are talking about selling people new funds at IPO. Not selling them old knocked in CEF's trading at deep discounts.
[/quote]

Hmm...  I thought we were looking for good ways to make clients $ or start a relationship with a good story or product ... my bad.

Feb 4, 2007 10:23 pm

[quote=NOFX][quote=AllREIT] [quote=NOFX]

NFJ was up 31% in 2006 (including div. reinvest) and it was a lay up to buy in 12/2005.  It's not always about the IPO...

[/quote]

We are talking about selling people new funds at IPO. Not selling them old knocked in CEF's trading at deep discounts.
[/quote]

Hmm...  I thought we were looking for good ways to make clients $ or start a relationship with a good story or product ... my bad.

[/quote]

I'm with you NOFX...over the years I've had some fantastic results buying CEF's in the aftermarket.  At times I wonder why I don't do more of it.  Perhaps because there is so little research available it is just really challenging to find good ideas and perform solid due dilly on them.
Feb 5, 2007 3:58 am

[quote=joedabrkr] ]Still doubtful? Go to your b/d’s research platform

and input the symbol of a few of your CEF holdings, and see how much

research info you find. If there is any, it’s likely to be minimal. Why?

Well how much to the I-banker’s make after a deal is closed. ZIPPO![/

QUOTE]



Joe, you are dead-right. I have several clients with closed-ends, and I

usually end up going to EFTConnect to research them. It has much more

info than their own sites. This is the only site with much decent info that

I have found.