[quote]I’m unfamiliar with callable cd’s in detail…  I’ve ran into a client that has a bunch of them and they haven’t a clue either.  Their RJ guy put them in them…    What is the typical surrender charge for them?    And if they  are called will the money just go back into their RJ money account?  Bottom line, they want away from this guy and I’m weighing their options…[/quote] 
 
They sell at market value if sold prior to being called which could be more or less than what they paid for them. The bigger question is why can’t you hold them?

ell, that’s good question I haven’t found out yet. I don’t have my 7. Do I need my 7 or could I do a broker dealer change? But again, I’m not sure my B/D offers them…

Take it easy man…  Did you see anywhere I said I was advising them to get rid of their cd’s…?  No.  They could be, we haven’t completed going over their other assets, needs, etc… but just preparing.  I also said I don’t know the “Details”, not “don’t know anything”…  Geez.  You’d think a forum was a place you  could ask a question without fear of getting your head sliced off…   
There  is a lot of the situation you don’t know so you can’t advise that they should stay with their current advisor - just like you are telling me I don’t know enough…  Pot meet kettle, kettle meet pot…

For example, if a bank issues a traditional CD that pays 4.5% to the investor,
and interest rates fall to a point where the bank could issue the same
CD to someone else for only 3.5%, the bank would be paying 1% higher
rate for the duration of the CD. By using a callable CD, the bank can
pay a premium to stop paying the higher rate.

My client doesn’t have the certificates and is a little wary of calling to ask the surrender charges…  Tense situation with them and the FA. 

Any of you guys who have them with your clients, what is the typical surrender charge?

[quote]My client doesn’t have the certificates and is a little wary of calling to ask the surrender charges…  Tense situation with them and the FA. 

Any of you guys who have them with your clients, what is the typical surrender charge?[/quote] 
 
Hey dumb ars…I gave the answer once and I am giving it again…There are no surrender charges. They can sell at market value which could be more or less than what they paid for them. The CD’s are stored electronically like any other security. Are you thick headed???

Yes Noggin, so typically how much is the surrender charge???

Dude, for the final time, there are no surrender charges.  When a client wants to resell before maturity, it’s up to the broker to find the market for it b/c it’s a limited secondary market.  If it’s tied to the Dow and the Dow is doing well, they can probably sell it for more than what they paid for and if the opposite is true, they will probably take a loss. 
You don’t have your 7? Where do you work? I’m pretty sure if you don’t have your 7 that your firm won’t allow you to hold them because you’re most likely just doing mutual funds correct?

[quote]No S7 = no brokered CDs. [/quote] 

Thank you  - straight answer. 

[quote]Dude, for the final time, there are no surrender charges.  When a client wants to resell before maturity, it’s up to the broker to find the market for it b/c it’s a limited secondary market.  If it’s tied to the Dow and the Dow is doing well, they can probably sell it for more than what they paid for and if the opposite is true, they will probably take a loss. 
You don’t have your 7? Where do you work? I’m pretty sure if you don’t have your 7 that your firm won’t allow you to hold them because you’re most likely just doing mutual funds correct?[/quote] 
 Thanks for the answer.  I get it on the surrender charge… I just overlooked the comment above about selling at market… I was so set in my mind on surrender charges because I had been told by an all knowing broker that I needed to find out the surrender charges… 

Thanks again…

That’s an equity linked CD, not a callable CD…
Callable CD’s are like callable bonds…The issuer (the bank) offers them with a maturity date, but the call feature is permitted after a certain period of time…
Example: 5 year CD, non-callable for 6 months…OR 20 year CD, non- callable for 1 year…
I have a client, for example who bought 1 about 2 or 2.5 years ago…5%, 5 year CD, non-callable for 6 months…It was called after 6 months or a year…The benefit, at that time, was that the coupon was higher than straight 5 year CD’s, and obviously better than 6 month CD’s…
Another one has an 8 year callable CD, paying 5.25%, non-callable for 6 months…It has not been called…and shows on their statement at about 98.5…But, if they wanted to sell it, I would need to do a bid request, get a bid, and then see if the client wants the price…which I would hope would be somewhere near that 98.5 price…
I’m not recommending them or anything, but they have their place…

That’s an equity linked CD, not a callable CD…
Callable CD’s are like callable bonds…The issuer (the bank) offers them with a maturity date, but the call feature is permitted after a certain period of time…
Example: 5 year CD, non-callable for 6 months…OR 20 year CD, non- callable for 1 year…
I have a client, for example who bought 1 about 2 or 2.5 years ago…5%, 5 year CD, non-callable for 6 months…It was called after 6 months or a year…The benefit, at that time, was that the coupon was higher than straight 5 year CD’s, and obviously better than 6 month CD’s…
Another one has an 8 year callable CD, paying 5.25%, non-callable for 6 months…It has not been called…and shows on their statement at about 98.5…But, if they wanted to sell it, I would need to do a bid request, get a bid, and then see if the client wants the price…which I would hope would be somewhere near that 98.5 price…
I’m not recommending them or anything, but they have their place…[/quote]
Thanks for that clarification - I guess the smart a$$ above that called ME the dumba$$ can open mouth and insert foot now… 
Seriously though, good info - I appreciate the time you spent detailing that…

Rookies coming to forums asking for advice!
How low can the wirehouses go training reps!
In a way we should feel sorry for these rookies they have no where to go there BM  must be a jerk and could care less about rookies waiting for them to fail.
But most of all the clients get ripped!
 

[quote]In a way we should feel sorry for these rookies they have no where to go there BM  must be a jerk and could care less about rookies waiting for them to fail. 
[/quote] 

Greenbacks, you’re an idiot.

[quote=gettingstarted]My client doesn't have the certificates and is a little wary of calling to ask the surrender charges...  Tense situation with them and the FA.  Any of you guys who have them with your clients, what is the typical surrender charge?[/quote]

I would say that if it is a "tense situation" with a callable cd, then you my friend, have not done a good job advising them.

A callable cd is a cd that can be redeemed by the issuer at any time.  They probably got a higher rate because there is a risk they could get their money back earlier than they want.  If you buy a cd at a brokerage house, callable or not, you can always sell it for market value.  They didnt get screwed and stop prospecting my clients.

[quote=Winston Smith]

[quote=gettingstarted]My client doesn't have the certificates and is a little wary of calling to ask the surrender charges...  Tense situation with them and the FA.  Any of you guys who have them with your clients, what is the typical surrender charge?[/quote]

I would say that if it is a "tense situation" with a callable cd, then you my friend, have not done a good job advising them.

A callable cd is a cd that can be redeemed by the issuer at any time.  They probably got a higher rate because there is a risk they could get their money back earlier than they want.  If you buy a cd at a brokerage house, callable or not, you can always sell it for market value.  They didnt get screwed and stop prospecting my clients.

[/quote]

FYI - the tense situation has nothing to do with the type or quality of the investment advice - understand now...?

Gettingstarted,

I know this thread is more than a week old... In the future, when you come across something like this look to see if the client account statement list a CUSIP (a 9 digit alphanumeric) number?   This assumes that the CD is held in a brokerage account and not a bank account.  Once you have the CUSIP number call your firms bond desk, give them the CUSIP and ask them to get you the details.

BTW if you've never called a bond desk before, try to know the questions you are asking ahead of time so that you don't spend all day on the phone with the bond broker.