MUTUAL FUND ACTIVITY SEEMS TO FORETELL
MARKET SHIFTS.
Choose a niche
To find new leads, some advisors are
reinventing themselves and focusing on
a niche. Grady Jennings, CLU, ChFC,
head of Ontario, Calif.,-based Jennings
and Associates/Dignity Group, and a
producer with Mutual Trust Financial
Group’s MTL Insurance Company, has
been successful in growing his business in
a specific market segment. “I’ve worked
with a lot of families who have children
with disabilities,” he explains. “Their need
for protection is never going to change.”
Jennings, who also is principal and
one of the original registered representatives of MTL Equity Products, Inc.,
which is celebrating its 25th anniversary
this year, sees a steady flow of prospects.
“We are doing a lot of broker-of-record
work now with people who aren’t
satisfied with their current advisor,” he
explains. This provides him with opportunities to serve a wide range of his
clients’ financial needs—from insurance
to investments and more.
Explain market trends As difficult as finding new investment prospects may be, selling to them may be even tougher. Preston Wines, financial advisor with Woodbridge, Va.,-based Edward Jones, uses data to help his clients and prospects understand cycles and boost investment sales. For instance, he explains to them the correlation between consumer confidence and equity performance. “If you go back 35 or 40 years, every time confidence dips below a certain level, 12 months later, the market has gone up by double digits,” he explains. “Typically the very best years
have followed the worst. That gives buyers faith.”
Mutual fund activity also seems to
foretell market shifts. “We have a bar
graph showing mutual fund inflows vs.
outflows,” explains Wines. “When you
look at peaks in inflows, you’re probably due for a better market. Nationally,
mutual fund inflows are starting to turn
around,” which should lead to a turnaround in investment sales.
Jim Kelley, CFS, St. Louis-based financial advisor with The America Group
and registered representative through
The O.N. Equity Sales Co., works
with a lot of phone-company retirees,
counseling them before retirement on
distributions. “In most cases, we suggest
taking a lump sum,” he explains. “That
offers the most flexibility.” He encourages clients to spread the distribution.
“We may put part of it into a brokerage account, where we buy individual bonds, mutual funds or individual
stocks, as their risk tolerance allows,” he
says. He used individual bonds because
of the guarantees and because they
offered pretty good value for a while.
“That’s drying up a bit,” Kelley notes,
“so we’ve dipped our toes into the market some, particularly in international
and domestic stock funds.”
Consider alternatives
Part of Kelley’s success also involves
taking a different approach. “There
are alternative investments including
funds that inverse U.S. government
bonds or the dollar,” he explains.
Market declines and volatility make
these worth considering.
“It’s incumbent on advisors to
look for different places to make
money for our clients,” he says. Between ETFs and the different mutual
funds that are out there, he adds,
advisors have many options.
Manage risk with annuities
With clients who are more risk-averse,
equities may be more difficult to
sell—at least for now. But advisors
can’t afford to lose them; instead,
they should address their concerns
through consistent contact and, where
appropriate, portfolio diversification.
Annuities could also be a way to retain
customers in times of uncertainty.
Rafferty sees some value in broaching
the subject of annuities to clients. “By no
means would we advocate that people
stop investing in the equity markets,
particularly as low as they are,” he says.
“But if your clients have not used annuities before, this might be an opportune
time to talk about the role they can play in
a portfolio.”
Indexed annuities could be part of
that conversation, as well. “Advisors
can talk about the certainty of return of
capital with indexed annuities,” Rafferty says. “Also, they can discuss the
opportunity to earn more than with a
traditional fixed product.”
Use tax-deferral strategies
As advisors offer investment counsel,
they must recognize today’s realities.
“What is old is new again,” Rafferty
explains. “Tax deferral used to be part
of the core conversation with clients,
