There are always scenarios where one of your clients will require ready access to funds. It’s prudent to anticipate your clients’ borrowing needs. One way of meeting them is with an Access Line of Credit (ALOC).
Individuals or corporations might be facing an unexpected expense or perhaps they want to consolidate debts that are at high interest rates. When the need arises, are you there for them? Or do they even reach out to you?
Maybe not. When your clients want to discuss investment or planning strategies, you’re top of mind as their advisor. However, when they need to borrow money, they may be looking at other options.
Traditionally, clients will go to their bank and obtain a personal or corporate line of credit, usually unsecured. These can be very expensive in terms of fees and interest rates.
Sometimes clients might move to liquidate an asset to fund an expense. Doing so may derail their investment plan unnecessarily and can be even more costly in cases where surrender charges or capital gains taxes apply.
Regardless of your clients’ current requirements, it’s almost certain they’ll need to borrow money in the future. Setting up an ALOC now will help provide them with the flexibility they’ll need to borrow in the future.
Manulife Bank’s ALOC (up to $100,000) and ALOC Plus (over $100,000) are secured by Manulife products such as non-registered investments or TFSA assets held in segregated fund contracts, mutual fund accounts and Guaranteed Investment Certificates, or cash surrender value within permanent life insurance policies.
Manulife Private Wealth Lines of Credit are secured by Manulife Private Wealth investments and provide clients with the ability to access funds similarly to the ALOC Plus.
How is employing this strategy a win-win? For clients, a line of credit costs them nothing until they use it. When they do, it will likely be at a better interest rate than is available from an unsecured bank loan. Establishing this tool now means your clients won’t have to scramble to find money when the need does arise, as it inevitably will.
That’s advantageous for you too. You have another chance to demonstrate your value by foreseeing your clients’ requirements. You can help them keep their investment plan on track by avoiding a premature liquidation. As well, you can reduce the possibility that your clients will look to another financial professional in a time of need.
Clients can use all line of credit options at their discretion. They have convenient access to the funds via cheque, ATM withdrawal, online banking or Interac® e-transfer.*
ALOC Plus and Manulife Private Wealth Lines of Credit are fully underwritten, which means clients have to provide all financial information to show evidence of debt servicing as well as satisfactory credit bureau. For Manulife Private Wealth Lines of Credit, more weight is given to a client’s tangible net worth in relation to the loan amount.
Both lines of credit require monthly interest payments only. Principal payments are up to the client.
Show clients how this can work
Raising the possibility and practicality of this borrowing strategy should be part of your routine client reviews. Clients can have peace of mind that the option is in place.
Consider the range of possibilities when showing clients how a line of credit can work for them.
It can provide an emergency account for covering expenses, a way to consolidate debt or a means to borrow to invest. Clients can employ a leverage strategy whenever they want (as long as they’re comfortable with the idea) in whatever investments they want.
By helping clients to have liquidity available, you can fill in a key piece of their financial picture.
® Registered trademark of Interac Corp. Used under license.