Low interest rates might be good for homebuyers, but that just isn’t the case for the average investor. Returns on vehicles like certificates of deposit (CDs) are meager at best, and they require people to lock up their money for a long time, reducing liquidity. Early withdrawal penalties make CDs an even less attractive investment. Conventional savings accounts and interest-bearing checking accounts are earning low yields, as well.
Your current and prospective clients may not be financial experts, but they do know what low interest rates mean to them – and will be looking for advice on where to put their money to work hard for them. Life insurance can be a smart way to do just that, but as the advisor, you’ll need to explain its value. A safe bet, life insurance can perform much better than traditional products in a low-interest-rate environment. And they have the added bonus of a death benefit.
Here’s what you and your clients need to know.
Understanding the Environment
Low interest rates continue to have an impact on investors – and, ultimately, on agents and financial advisors. Things aren’t expected to change any time soon. The Fed’s decision in December to finally increase interest rates after almost a decade was a welcome move. However, additional increases in 2016 are very unlikely, and if and when rates do rise, it will likely be relatively modest.