CD Replacement Month Is Here

Black Monday stock market crash

Black Monday, 1987. The origins of CD Replacement month.

Historically speaking, October has been a tumultuous month for the economy. This year will bring the 31st anniversary of Black Monday (October 19, 1987) and the 29th anniversary of the Friday the 13th Mini Crash (1989). While the more recent financial crisis of 2008 played out over several months, much of the action – Lehman Brothers and WaMu bankruptcies, stock market crashes, global panic, bailouts, etc. – all took place during the last half of September and throughout October. We won’t get into the reasons behind these crises, but each had one common result – investors went scrambling for safety.

The History of CD Replacement Month

Looking back to the Black Monday crash when the Dow Jones Industrial Average sank by 22.6%, many found that safety in the form of Certificates of Deposit. Investors withdrew their exposed investments and transferred their money into CDs. With guaranteed interest rates and FDIC backing, CDs were a widely used means of protecting one’s money from market volatility; a fact that remains true today. The return on CDs today is nowhere near what it was 31 years ago. However, things are slowly improving thanks to the recent federal interest rate hikes.

However, due to their low rate of return, CDs, do not hedge well against inflation. At least not when compared to other products, like certain annuities. This is especially true with long-term CDs that many consumers automatically renew out of habit. As a result, consumers may be losing real-world value that could be parlayed into another, better solution.

CDs and Interest Rate Hikes

Although this week’s rate hike will boost the “risk-free” return for CDs, it will take at least 30 days to see the effect. Consumers who jump the gun will be locked into the lower rates, stuck holding onto an investment that might not keep up with inflation. The top-of-mind awareness created by CD Renewal Month is a great opportunity for advisors to start the conversation with clients and prospects.

The discussion could be as simple as a CD review or renewal, or how they can provide retirement income. However, you should offer an overview of their options and alternatives to CDs. To help, Legacy Financial Partners has a wealth of resources for agents and advisors looking to leverage these CD replacement opportunities.

Our 2018 CD Renewal Kit is a comprehensive AND complimentary package that includes a CD prospecting letter, consumer-facing presentations, and additional materials that will help you take full advantage of CD replacement month.

2018 CD Renewal Kit

 

 

About the author

Legacy Financial Partners - Legacy Financial Partners is an independent and full service Life Insurance and Annuity FMO that provides specific marketing solutions to help their clients succeed. Using dynamic tactics, an extensive support network and progressive marketing options, Legacy Financial Partners provides unique and specific development strategies to their business partners.

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