Get ahead of the game by proactively suggesting an SBLOC

09/18/2024 — Key takeaways:

• Proactively offering solutions such as a securities-backed line of credit (SBLOC) builds trust and strengthens client relationships.
• An SBLOC allows clients to access cash without liquidating investments, offering lower interest rates and flexible repayment.
• Engage with clients regularly to understand and address their upcoming cash needs.

In the ever-evolving landscape of financial planning, staying ahead of clients' needs is important. A powerful way financial professionals can provide solutions is by proactively engaging with clients to identify their upcoming cash needs. This approach not only positions you as a trusted advisor but also ensures that clients are well-prepared for any financial eventuality. One effective solution to consider is establishing a securities-backed line of credit (SBLOC). Here’s how it can be a game-changer for both you and your clients.

Understanding upcoming cash needs

The first step in providing proactive financial solutions is understanding what upcoming cash needs may be on the horizon for your clients. This involves regular and open communication in which you discuss their short-term and long-term financial goals, potential large expenses and any previously unforeseen circumstances that might require immediate liquidity. By identifying these needs early on, you can tailor your advice and solutions to ensure that your clients are well prepared.

Introducing securities-backed line of credit (SBLOC)

One of the most effective solutions for addressing upcoming cash needs is establishing a securities-backed line of credit (SBLOC). An SBLOC leverages a client's non-retirement portfolio as collateral, allowing them to access cash without liquidating their investments. This means their investments remain intact and continue to work for them, potentially growing in value over time.

1. Lower interest rates: SBLOCs typically offer lower interest rates compared to traditional loans. This makes them a cost-effective option for clients who need access to cash but want to avoid the higher costs associated with other forms of borrowing.
2. Flexibility: One of the standout features of an SBLOC is its flexibility. There is no fixed repayment schedule or maturity date, giving clients the freedom to repay the borrowed amount at their convenience. This can be particularly beneficial for clients with fluctuating income or those who prefer a more flexible repayment structure.
3. Emergency cash management: By establishing an SBLOC, clients can put any "emergency cash" they may have back to work for them. Since the line of credit will be there if cash is needed, clients can invest their emergency funds in higher-yield opportunities, knowing they have a safety net in place.

Strengthening client relationships

Proactively offering solutions like an SBLOC not only provides peace of mind for clients but also strengthens your ability to support them effectively. When clients notice that you are thinking ahead and providing tailored solutions to meet their needs, it builds trust and reinforces your role as a valuable advisor. This proactive approach can lead to long-term client relationships and increased client satisfaction.

1. Client assessment: Begin by assessing your client's current financial situation, including their investment portfolio, cash flow and upcoming financial needs. This will help you determine whether an SBLOC is a suitable solution for them.
2. Education: Educate your clients about the benefits and features of an SBLOC. Explain how it works, the advantages it offers and how it can fit into their overall financial plan.
3. Application process: Guide your clients through the application process. Ensure that they understand the requirements and provide all necessary documentation to streamline the approval process.
4. Ongoing support: Once the SBLOC is established, continue to monitor your client's financial situation and provide ongoing support. This includes regular check-ins to ensure that the line of credit is being used effectively and to make adjustments as needed.

Proactively securing a securities-backed line of credit is a powerful way to meet your clients' upcoming cash needs while keeping their investments intact. By understanding their financial goals and offering tailored solutions such as an SBLOC, you can provide peace of mind and strengthen your client relationships. This approach not only positions you as a trusted advisor but also ensures that your clients are well-prepared for any financial eventuality.