3 Tips for Your Clients During CD Renewal Month

October 8th, 2021 | Luke Roth

Did you know most CDs come due in October? Upon getting a tax return in April, many people will shelter it in a CD or similar safe-money type account. These vehicles often renew at 6 month intervals, making October a prime month for CD renewals. That’s a great opportunity to check-in with your clients and uncover possible opportunities for potentially stronger investment vehicles. Myriad Advisor Solutions has prepared these talking points upon encountering a client with a maturing CD or similar safe-money vehicle.

  1. Low Interest Rates Can Hurt Purchasing Power. The rule of thumb goes that your investments must be earning 3% to keep up with inflation or risk losing purchasing power. For example, if you have $1 and an apple costs $1, you have the power to purchase the apple. However, if the apple’s cost increases to $2 while your cash reserve stays at $1, your purchasing power has been effectively halved. In 2021, inflation spiked to 5.3% and the average 5-year CD rate is returning 0.28%!
  2. Beware Automatic Rollovers. Many CDs have automatic rollover provisions built into them. That means if a client takes no action at the end of the term, the vehicle can ‘roll over’ into a new term with a lower rate. Your clients might receive some prior notice from the bank, but many will not be aware they are at the end of their term and action is required – which is where you come in. Keep in mind that many CDs allow for a ‘grace period’ after the maturity date for the client to make a decision!
  3. Less Accessibility. As previously mentioned, the average 5-year CD rate is returning .28%, which means clients might seek longer terms to get a higher rate. Its important to bear in mind that there is little to no liquidity (typically just interest only) on these kinds of products. Should your client decide to continue in a CD or CD-like vehicle, they should have enough liquidity elsewhere for any rainy days over the term.

While CDs and CD-like products have a place in the financial world, October is a great time for you to confirm they are right for your client’s goals and long-term outlook. Check out Myriad’s blog posts for other topics you can utilize when reaching out to your clients!