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Do Your Clients Have Lazy Money?

Posted by Mark Triplett, CEO of Triplett-Westendorf Financial Group on Wed, Apr 08, 2020 @ 12:00 PM

When it comes to wealth management, your client's money can do two things: It can earn interest or buy stuff. The problem is that many clients have "lazy money" just sitting around not working towards their financial goals and objectives. Money gets "lazy" when it is not being used to do one of the two things it can do with respect to wealth management.



Client's Money Could Earn Interest

Your client's money may be lent to a financial institution and in return they receive an interest rate. Insurance companies issuing interest-bearing products like fixed annuities and fixed life insurance provide guarantees backed by the claims-paying ability of the insurance company. They receive premium payments from the purchaser of their products. The insurer then lends that money to institutions like large corporations, and the US government. For example, the insurer may purchase long-term debt such as corporate bonds and government treasuries. The insurer receives a yield on these investments. The insurer then keep a spread/portion of the yield earned to cover their expenses and profit first. Finally, they pay the policyholder an interest rate out of the remaining yield. 

Or Their Money Could Buy Stuff

Clients could use money to purchase tangible and intangible property. For example, clients need money to purchase food, clothing, shelter, automobiles, cell phones, fuel, etc. They may also use it to purchase services such as healthcare, lawn care, or any other service in which you trade your money for someone else’s expertise and time.  

Clients may also purchase investments. They can purchase stocks, bonds, mutual funds, and so on. When clients own an investment, they bought something with their money. Before that money can be deployed somewhere else to purchase goods and services, the investment must be sold. Hopefully for your clients, someone is willing to pay them more for it than when they bought it. Make sure your clients recognize that this is not a guarantee, and sometimes they may be forced to sell investments for less than they paid for them.  

Ask About Lazy Money

With regard to retirement assets, ask your clients this question: “What is your money doing right now?” Is your money earning interest? Was it used to buy something? If it's not earning interest and was not used to buy something, then your clients might have lazy money. It's like an able- bodied person who won’t get up off the couch and be productive. We’d call that person lazy. If I did not get up every morning and go to work, my wife would call me lazy. She might call me some other choice words as well, and she’d be right!

Why Do Clients Have Lazy Money?

Most clients that have lazy money put up with it because they want to keep it protected from investment loss and they want to have access to it. As a result, they won’t buy investments like stocks, bonds, or mutual funds with their lazy money because the value of those investments can rise and fall.  On the other hand, they want to have access to their lazy money. 

Even though they may not like it, some are content with their money sitting in a no interest, or low interest bearing account. A savings account at a bank or a cash equivalent in a brokerage account are two common places for lazy money.

One of the primary reasons people are willing to put up with lazy money is that they do not know if an alternative  exists. They may be completely unaware of options, like indexed universal life, that provide protection from investment risk, credit a competitive rate of interest, offer options to cover costs associated with long-term care needs, and permit access to the money if it is needed through loans or withdrawals. If they knew there was a way to put their lowest performing assets to work while permitting access to their money if-and-when they needed it, subject to the surrender policy of the insurance carrier, which could include penalties or forfeiter of benefits, perhaps they would not be so tolerant of their lazy money anymore. Make sure your clients are aware of the different ways they can put their money to work.

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Tags: IUL (indexed universal life insurance)



This content is for informational and educational purposes only and is not designed, or intended, to be applicable to any person's individual circumstances. It should not be considered as investment advice, nor does it constitute a recommendation that anyone engage in (or refrain from) a particular course of action.

The opinions and ideas expressed by the speaker are their own and may not reflect the views of Partners Advantage – A Gallagher Company. The presentation is for informational purposes only. You should not treat any opinion expressed by Mark Triplett, CEO of Triplett-Westendorf Financial Group, as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. Mark Triplett’s opinions are based upon information he considers reliable and Mark Triplett’s statements and opinions are subject to change without notice.