Good. You know what you did. Hell, everybody was doing it. The auction rate securities market was made in the shade, a safe bet, a sure thing elevated by most everyone to a lofty pedestal. And you needed something to hook clients that are increasingly 'getting up there' in age.In other words, the boomers are not only aging, they're beginning to retire. The largest single demographic in the entire population continues to pilot the ship. They're the kids who drove the need for new schools, and new subdivisions in the 1950s. They're the ones Madison Avenue began, and continues to court for everything from dish soap, to cars and condos, to retirement living now. They're the ones who have fashioned radio formats, driving the need for all those nostalgia stations. No single group of people has had such a dramatic effect on the shaping of society as we know it, simply through strength in numbers.
And now, they're beginning to retire. Which makes your job harder, because all those baby boomers at, or near retirement age are suddenly looking for safe bets, and the proverbial Sure Thing. They're going conservative. They can't afford to risk their principle, not at this stage in their lives.
If you can't offer them a decent return tethered with low risk, they're just going to take their money elsewhere.
So what do you do? Well, you didn't really lie or fib, did you? The auction rate securities market had been steaming along nicely. There had never been any problem unloading bonds, or securities within the auction rate securities (ARS) envelope. As long as banks knew they could unload them, they'd buy. Good as cash, they said.
Well, they weren't good as cash, now were they? Not quite as good—a fact you were quite aware of, as was every other broker, too. But that was the perception, so you just sold the perception. You weren't really lying—you were just repeating what was already out there, being articulated by everyone else.
As for articulating just what these investments truly were, and the 'what-ifs' that went along with them…well, you just kept that part to yourself, didn't you? Your client didn't need to see the prospectus. Not really. It's a sure thing, practically. Why rock the boat?
No, you didn't fib. You just perpetuated the myth, and shielded the investor from a few of the, shall we say, 'distasteful' details inherent with the product they were buying.
Did that make it right?
How do you feel now, since the implosion of the myth onto itself, and the market all but drying up? How can you explain the unthinkable? The banks, no longer buying up the ARS bonds (some of which were shackled with 30-year terms) because they suddenly had no buyers. They wouldn't buy what they couldn't sell.
Do you blame the banks? No. It's just good business. Do you blame the investor for not knowing the score? No. The investor wasn't told the whole story, thus the investor bought a bill of goods.
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All because you saw your clientele slipping away, losing interest in anything that whiffed of the least bit of risk. They wanted to put their money into GICs, or even—heaven forbid, savings accounts, in an effort to ensure it would be safe. Peace of mind that was a small price to pay, a small consequence of failure to earn a stellar return, yet protect the
well-guarded principal sum.
At 55, 60, 65 years of age your peak earning years are behind you, you can ill afford to roll the dice. But you convinced them to, didn't you? To secure their business, and to earn the fee.
Okay, so the market soured and you're on your way to perhaps lose a few commissions. But you're not in danger of losing the BMW. Your clients, meanwhile, are losing their shirts.