Module 5 Expanding the Scope of Investments A ...retirement.pershing.com/...Expanding-the-Scope-of-Investments.pdf · Module 5 Expanding the Scope of Investments Foundational Concepts
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Guarantees apply to certain insurance and annuity products (not securities, variable or investment advisory products) and are subject to product terms, exclusions and limitations and the
insurer’s claims paying ability and financial strength.
Source: Standard & Poor’s 500 Index from January 1, 1991 to December 31, 2014. An investment can not be made directly into an index and index returns do not reflect the deduction of
fees. Returns are not adjusted for inflation. Past performance does not guarantee future results and an investment may be worth more or less than its original cost.
• Must pay out at least 90% of their taxable income as dividends
• 166 REITS are traded on the New York Stock Exchange
• Market Capitalization: $786,502 million
• FTSE NAREIT All Equity REITs Index
– Average annual total returns
> 5 Years: 14.4%
> 10 Years: 7.05%
> 20 Years: 10.90%
– Dividend yield: 3.87%
– 30-Year Correlation to ML Government/Corporate
Bond Index: 0.19
• FTSE EPRA/NAREIT Global Real Estate Index annual dividend
yield: 3.60%
Source: National Association of Real Estate Investment Trusts (NAREIT) as of June 30, 2015. The performance quoted represents past performance and does not guarantee future results.
Please note that it is not possible to invest directly in an index and index returns do not reflect the deduction of fees. All data are derived from, and apply only to, publicly traded securities.
Real Estate is a cyclical industry that is sensitive to interest rates, economic conditions (both national and local), property tax rates, and other factors. Changes in real estate values or
economic downturns can have a significant negative impact on issuers in the real estate industry. Stock markets are volatile and can decline significantly in response to adverse issuer,
political, regulatory, market, economic or other developments. Sector funds can be more volatile because of their narrow concentration in a specific industry. In general the bond market is
volatile, and fixed income securities carry interest rate risk (i.e., as interest rates rise, bond prices usually fall, and vice versa) and is usually more pronounced for longer-term securities.
Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Treasuries are debt obligations issued and backed by the full faith and credit
of the U.S. government. They are considered to have low credit or default risk and, therefore, generally offer lower yields relative to other bonds.
Guarantees apply to certain insurance and annuity products (not securities, variable or investment advisory products) and are subject to product terms, exclusions and limitations and the
insurer's claims-paying ability and financial strength. Investing in a variable annuity involves risk of loss—investment returns and contract value are not guaranteed and will fluctuate. Variable
annuities’ sub-accounts are subject to market risk specific to the sub account and these are products for long-term investing. Riders may be purchased at an additional cost by investing in a
variable annuity subject to its contract terms and limitations. Investors should consult their tax or legal professional before investing in any annuity product.
Use Securities Lending to Generate Additional Income
Review Your
Client Base
Do you have clients
that want to:
• Earn additional
income from their
portfolios and
maintain a
minimum balance
of $250,000 in their
brokerage accounts
Fully Paid Securities Lending
• Provides a potential income opportunity for
clients with hard-to-borrow, fully paid-for
securities in a brokerage account
• Clients receive cash collateral in return and
substitute payments in lieu of dividends
• Clients control the securities and can sell
loaned shares at any time
• Clients will not have proxy voting rights,
but profits and losses, tax-lot accounting
and hedging positions are unaffected
Securities lending is not appropriate for all investors. Reclassification of dividend income from loaned securities may cause tax ramifications, and proxy voting rights on these securities are
forfeited. However, the cash collateral received for the loaned securities is protected by SIPC. As with any investments, the price of the securities on loan may fluctuate, and the investor may
not get back the amount invested. When selling loaned shares, the same tax consequences may apply as with other investments. Enrollment in the program does not guarantee that securities
will actually be borrowed from you. There is a risk that if the borrower defaults in some way, for example by becoming insolvent, it could result in the institution failing to return borrowed
securities to you; however, you will receive 100% of the cash value of the securities on loan paid from the cash collateral received for the loaned securities, which could have tax
consequences. Investors are encouraged to consult their tax advisor before participating in a securities lending program.
Focus on client goals, risk tolerance and diversification
Module 5 Expanding the Scope of Investments
Review Your
Client Base
Check for clients
that:
• Have significant
equity exposure
• Have significant
shortfalls in
retirement assets
• Do not have written
retirement income
plans
• Cannot withstand
market volatility
Note: Asset allocation doesn’t assure against market loss and, as with any investment, there is no guarantee that a diversified portfolio will protect against loss in a declining market.