April and October are traditionally known as CD replacement months, a designation that traces back to the October 19, 1987 “Black Monday” stock market crash. Investors, scrambling to protect their assets from the collapsing market, found safe harbor in Certificates of Deposit. The story behind CD replacement month highlights how major economic events can leave an impact still felt nearly 32 years later.
The History of CD Replacement Month
Looking back to the Black Monday crash when the Dow Jones Industrial Average sank by 22.6%, many found safety in the form of Certificates of Deposit. Investors withdrew their exposed investments and transferred their money into CDs. With guaranteed interest rates and FDIC backing, CDs were a widely used means of protecting one’s money from market volatility; a fact that remains true today. The return on CDs today is nowhere near what it was 30 years ago. However, things are slowly improving thanks to recent federal interest rate hikes.
However, due to their low rate of return, CDs do not hedge well against inflation. At least not when compared to other products, like certain annuities. This is especially true with long-term CDs that many consumers automatically renew out of habit. As a result, consumers may be losing the real-world value that could be parlayed into other, more advantaged solutions.
Discussing CDs with Clients
This makes a good argument in favor of CD replacement over renewal. In these times of uncertainty, your clients’ assets and retirement savings need as much protection as possible. The top-of-mind awareness created by CD Replacement Month is a great opportunity for producers to start the conversation.
To help get the ball rolling, IAMS is now offering our 2023 CD Replacement Kit. The kit includes a wealth of marketing materials:
- 2023 Taxable Equivalent Yield chart
- A split-annuity alternative guide and checklist
- CD vs. FIA sales strategies
- An SPL vs. CD calculator
- Prospecting letters, a fillable fact finder, social cards, and post copy
- Going Broke Safely and Market Loss Recovery concepts
- IAMS’ Beyond Capital Transfer guide
