D. Help them find the highest yield available

We are all creatures of habit – and for the vast majority of financial advisors, old habits can lead to unproductive answers about "shopping for CDs." In most cases, the best answer is D.

Answer D. will lead you to new assets, referrals, and clients – all of which you can earn with relatively little cost or effort.

Before the Internet came along, it wasn't practical for most financial advisors to offer a "high-yield CD shopping service." But for reasons explained in this article, and in specific ways described, you can and should implement such a service right now.

The Futility of Opposing CDs

Let's start with a brief story that illustrates how futile it can be to oppose CDs. A friend of mine, a semi-wealthy retired person, was approached not long ago by a prominent financial advisor. After collecting a modest amount of data in the first "get-acquainted" meeting, the advisor focused on a large amount of money this prospect held in CDs. "I'm curious why you have so much in CDs," the advisor probed.

"I like the safety of FDIC insurance and don't see any reason not to have it," the friend asserted.

The advisor paused and then replied: "At low CD interest rates, you sacrifice current income. With inflation, your retirement lifestyle will suffer over time."

"No it won't," my friend shot back immediately

When the advisor held to his position and the prospect did the same, the meeting and the potential relationship were soon over.

Thinking back on the encounter, I realized that this advisor had made a rookie mistake, which leads to an important rule: You must know a client (or prospect) very well to offer a convincing argument against CDs.

In this case, the advisor did not know about all of this prospect's assets and whether they would be sufficient (at CD rates) to sustain a long and happy retirement. Also, the advisor did not address the potential that CD rates could go higher or that inflation could be low.

That leads to a second idea: For a given person who wants to put a specific sum of money into CDs at a given time, you are not likely to succeed by suggesting alternatives. However, you can succeed by helping that person find the highest CD rate available. You then will be in position to do profitable business at other times, or with other money, or with other people.

Why CDs Have Become Financial Commodities

FDIC insurance, the very feature that makes CDs so attractive to retired people, also has made CDs the ultimate financial commodity. For a CD in any amount up to the FDIC limit of $100,000, there is little difference between products offered by the largest, strongest bank in the world and a two-window bank in the middle of nowhere.

Over the past few years, a handful of banks across the U.S. have decided to capitalize on the commodity-nature of CDs by offering aggressive, market-sensitive yields through the Internet. If you know which banks they are, what products they offer, and how they sell CDs, you are ready to offer your market a valuable "high-yield CD shopping service." The Internet tour that follows will help you.

An Internet Tour of High-Yield CDs

Tour stop #1 is at:

• http://www.money-rates.com/cdrates.htm

At the money-rates site, you will find an always-current summary of the highest FDIC-insurance CD rates offered on the Net, by maturity. Let's focus on the 1-year (12-month) rate because it's a popular maturity that lately has offered the best combination of liquidity and yield. Also, it is the maturity in which banks compete most aggressively on the Net.

The 1-year rates and rankings shown at this site change daily as banks respond to current market conditions. However, the highest 1-year rates listed at this site usually are 1-2% higher than the national average rate. (At the top of the money-rates site is a "Bank CD Index," which approximates the national average yield.)

By checking the money-rates site often, you will notice that the major players in the "Internet CD Marketing Derby" don't change much. For 1-year CDs, they usually include the banks shown in the table below. (Note: Internet links to these banks are available on the money-rates site.)

The next tour stop is to visit Web sites of these banks, to understand who they are and how they market CDs. Let's use Corus Bank as an example:

• http://www.corusbank.com

Then, click on "Online Deposit Account Application" and "Rates for Deposit Accounts"

Unless your clients live in Chicago, they probably have never heard of Corus Bank. But it's not a small cyber bank by any stretch. The parent company, Corus Bankshares, is a public company with more than $6 billion in assets. In addition to selling CDs on the Internet, the bank operates 11 branch offices in the Chicago metro and has a significant corporate loan business.

From early 2004 through mid-2005, Corus Bank doubled its deposit base to $5.5 billion, mainly through Internet marketing. The formula that this bank and other Net CD marketers follow is simply this: Higher deposit volume + low marketing and service costs more than offset the slim margins of the highest-yield CDs.

If a bank doesn't have a large installed book of low-rate CDs to protect, it costs very little to market high-yield CDs on the Net. Also, people who shop for CDs on the Net usually fill out their own paperwork, and they don't constantly drop by the branch to waste bank officers' time.

Like other leading Net CD marketers, Corus Bank's Web site includes an online application (with instructions) that can be filled out and mailed with a check. It also includes a table of current CD rates that change about weekly. While you are at this tour stop, take the time to understand each bank's CD policies and terms ? particularly how depositors can lock in a current rate when opening an account on the Internet. These policies fall into three categories:

• The rate is locked (for a limited period) based on the postmark (e.g., Corus Bank, Capital One and Providian).
• The rate is locked only when the account is opened electronically on the Internet via electronic funds transfer (e.g., ING Direct, Netbank).
• The rate can't be locked in and may change before the application and check are received (e.g., Nexity Bank).

It's also a good idea to print out a few blank applications and keep them handy.

Offering Interest Rate Guidance

The CD shopping service that you will offer consists of a brief counseling session, including information on current interest rate trends. Most CD shoppers want to understand whether rates or rising or falling, and whether it is advisable to choose short- or long-term maturities. Since U.S. Treasury yields drive CD yields, the next tour stop is the official site for obtaining current Treasury yield curve and interest rate data.

• http://www.ustreas.gov/offices/domestic-finance/debt-management/interest-rate/yield.html

On one Net page, updated daily, you can access all Treasury daily rates for the current month for maturities ranging from 1 month to 20 years. Click "Historical Data" to access data for prior months and years.

In the current environment, you will hear CD shoppers ask the same question over and over: "Since rates are going up, does it pay to wait?" This page holds the answer. Internet CD marketers are so sensitive to current rates that their rate-settings usually are driven by an average of Treasury rates (for comparable maturities) over the previous 10 days. If this average is at least 10 basis points higher than rates over the past 20 days, then you usually can count on a higher rate by waiting a week or two.

That completes our Internet tour. The next section offers specific suggestions for planning this service.

Specific Suggestions

• Promote the service as a 15-20 minute free counseling session for those who are already sold on FDIC insurance. Understand that you probably won't get paid by this client on this money at this time. However, to participate in the service, clients must agree to complete a brief "satisfaction survey" at its conclusion.
• Using your desktop or laptop, show the client Tour Stop #1 above with the top-yielding Net CD sellers. Explain that the FDIC insurance offered by these banks is the same as at local banks. Ask them to compare these rates with their favorite local banks.
• Then, show them the last tour site described above (the official Treasury rate site) and discuss current rate trends.
• Advise clients not to put more than $100,000 with any one bank, to be sure the FDIC limit isn't exceeded. For a variety of reasons, most Net CD marketers don't pay higher yields on "jumbo CDs" over $100,000.
• After the client has chosen a bank, give him/her a blank application downloaded from the online site. Or encourage the client to complete an online application with electronic funds transfer, if the bank offers this option. Normally, all that is needed to complete an application is a name and signature, Social Security number, driver's license number, beneficiary designation, and withholding election.
• If the bank allows a postmark to locks in an interest rate, encourage clients to send the check and application by courier or registered mail, so they will have proof of postmark.
• Normally, it takes one to two weeks for the CD to be issued, and clients should verify that their CDs have been issued in the correct denomination, maturity and yield. Some Net marketers can be a bit slipshod in crediting the correct rate, so encourage clients to complain loudly if they are assigned a lower rate. (Do not attempt to contact the bank directly on the client's behalf, unless you have power-of-attorney.)
• It helps to know about unique products offered by some Net CD marketers. For example, Capital One offers a "No Regrets" CD in maturities ranging from 6 months to 6 years. The holder has the option to increase one time (over the maturity) to a higher yield that may become available in the same maturity.

Two Ways to Follow Up

The key to making this service profitable is in your follow-up. Specifically, all participants in the service should be contacted twice:

1. About 30 days after the CD has been applied for, send by mail or e-mail a brief "satisfaction survey" that asks how helpful the service was. Make sure to ask participants about their other financial needs, other assets and referrals. Also, verify the CD amount, yield, maturity date and institution. Follow up by phone to remind clients to complete the survey, and ask them about other assets and referrals.

2. Carefully track all CD amounts and maturities. Send a reminder letter to each participant about 30 days before each maturity date. Offer a free review, and emphasize that better opportunities may be available than letting CDs roll over.

Put at least 100 people through your CD shopping service over the next year and meticulously follow-up with each one. You will be amazed at the results. This service will cost you 30 hours per year and less than $200 in postage and phone charges ? and it will produce benefits worth many times more.

Be positive about the good things in your clients' financial lives, including FDIC insurance and high-yield Net-marketed CDs. Turn them into attractive client services and rewarding competitive advantages for your practice.