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 that is 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, which many consumers automatically renew out of habit. As a result, consumers may lose real-world value, which could be parlayed into other, more advantageous 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 2024 CD Replacement Kit. The kit includes a wealth of marketing materials:
- IAMS’ 2024 Taxable Equivalent Yield chart
- A split-annuity alternative guide and checklist
- CD vs. FIA sales strategies
- SPL sales tips and comparisons
- Client concept guides on Going Broke Safely and Market Loss Recovery
- The 2024 IAMS vs. Barron’s Best Annuities guide
- A prospecting letter, email and fillable fact-finder
- Refreshed social cards and post copy
