History and a Math Lesson

History and a Math Lesson

Why do we study history? Because it’s all we have, and history tends to repeat itself. Well, what have we learned from the Japanese economic collapse of the early ’90s? Apparently, not much. 

Since their real estate bubble burst, Japan has been in a low-interest-rate environment for the last 20 years, yet we keep waiting for interest rates to go up. Right now, billions of dollars are sitting in low-yield fixed accounts earning less than 1 percent, waiting for a rate increase. 

We’ve now been waiting approximately five years for this “rising rate” phenomenon – when will we stop waiting and move on? 

So there’s your history lesson. Now, let me explain the math lesson. Do you know how significant it can be to find just one percent more yield on your clients’ conservative assets today versus five years ago?  

Five years ago, a five-year CD was yielding approximately 5 percent interest. If I could have found something to get that client 1 percent more yield, I would have increased their yield by 25 percent. As we stand today, a five-year national CD yield is averaging about 1percent.* If I could find something to get that client 1 percent more yield, I could increase their yield by 100 percent!  

You could certainly do that, simply by repositioning your clients’ assets in a fixed indexed annuity. With cap rates in the 3-4 percent range, it’s likely you will find your clients 1 percent more yield without risk to their principal. 

Don’t talk yourself out of presenting this option to your clients because YOU don’t believe they will be interested. Clients are seeking yields without risk to principal, and they are finally fed up with sub-1 percent yields.

So the next time your children ask you, “Why do we study history and math?” you now have your answer.


*As of Dec. 19, 2014