Advisor Services

Securities Based Lending Positioning:
Setting Up The Line

Many times, advisors will ask “how do I go about proactively setting up lines of credit with my clients?” Here’s an approach to take as an advisor when going through the process.

Watch a Video on Positioning Proactive Lines of Credit

During your next review say the following to your client:

“It came to my attention that you do not have a line of credit set up. I’d like to set one up for you today. There is no cost to set up the line, no ongoing fee and no expenses of any type if you never access the line. Mind if we send you the paperwork?”

Approximately 30% of clients will say yes. 70% will have questions:

Approximately 40% will ask: what is the rate:

“The interest rate floats, which means it changes as interest rates change.  Generally the rate is near Prime. If it turns out that you don’t like the rate you don’t ever have to use it but having it in place proactively gives you flexibility. If the rate was 10% I’d still recommend that you set it up to be prepared for emergencies – we’d just never use it.” 

Approximately 70% of clients will say yes.

Approximately 30% will say that they want to wait.

“You are welcome to wait but do you know how you could have $30,000 in your account and want to buy a $50,000 car. This lets you wire money to the dealership and then we can figure out what we are going to sell to pay for it later.” 

Or – Do you know how you could have a tornado / flood / earth quake hit your house. This line gives you an emergency reserve that you can access before insurance comes in. If we wait you need to know that it could take time to set up the line – time that you do not have in an emergency.”

Approximately 90% of clients will say yes at this point in time.

 

Disclaimers:

Securities based lines of credit can be risky and are not suitable for all investors. Before opening an account you should understand the risks.  

The interest rate floats, which means it changes as interest rates change.  Generally the rate is near Prime. If it turns out that you don’t like the rate you don’t ever have to use it but having it in place proactively gives you flexibility.

Proactive Lines of Credit

Want to See More? Sign Up Now.

Sign up at PersonalCFO.com for immediate access to:

original case studies

videos focused on real-life situations

see the data we use

practical guides for your next client review