SEC's "Seesaw" Explanation Of Interest Rates A Good Device That Advisors Can Use In Client Communication

Monday, July 22, 2013 10:19

Tags: client education | marketing | U.S. economy | US investing

The Securities and Exchange Commission's recent investor alert comparing the inverse relationship between bonds and interest rates to a seesaw is a simple but effective device.

The New York Times used the seesaw analogy this past weekend in its coverage of the interest-rate risk issue and advisors should do the same.

Below is a graphic I cropped from the June SEC alert that RIAs can use to explain the interest rate dilemma to investors.

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If you click on the image below,  a high-resolution version will pop open that can be used in print materials. Just right click on it to save it. Then use this to send a notice to clients about higher intererst rates. You can borrow from the SEC alert for text explaining the way higher rates hurts bond prices.

Using government data is, of course, a great way to create client communications and marketing information about your firm that can be used in newsletters, emails, blog posts and social media. Since we all own the government's data, you can republish it without copyright problems.

This interest rate issue is a huge oine for advisors because interest rate cycles historically are long, drawn out affairs. The U.S. has experienced two secular interest-rate cycles since 1948. From 1948 to 1981, a 31-year period, bond prices dropped lower as interest rates rose. Since 1982, interest rates declined, in a 34 year cycle that benefited bond values. A new secular trend is starting, and advisors need to explain that to clients.   




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