REP.: You founded Brookstone in 2006 to offer managed money capabilities to independent insurance agents. How did you get involved in that segment?
Dean Zayed: Back in 2005-2006, there was a lot of controversy about an insurance agent only telling a client to move their variable annuity to a fixed annuity because it was a source of funds issue, and that agent doesn’t have the securities license to provide advice on that VA, which is a security. More and more insurance companies are now looking at the source of funds that these insurance agents are using to sell new product. It’s another reason why I saw a real need for these insurance agents to get their Series 65 license so that they can legitimately, legally, thoughtfully discuss securities with their clients.
REP.: Is it hard for them at first to convince their insurance clients to put their managed money with them?
DZ: It’s a bit of a credibility factor because if you’ve worked with an agent for 20 years and you love what he’s done on your life insurance, do you necessarily think of him as someone who’s going to help manage your money now? Part of it is educating the client about the direction you’ve gone as an agent.
REP.: Any investment trends that you’re seeing out there in the marketplace?
DZ: I see structured products as an emerging financial product that we have used in our strategies. I talked to other reps and advisors who have never heard of structured products. They may think that I’m crazy or that it’s too cutting-edge. The reality is, it’s a multi-billion-dollar product area that the large banks are manufacturing that do have a place both on the growth and the income side. We’ve incorporated structured products, which include notes and index CDs, into our platform.
Another trend is hedged equity. We believe we are one or two headlines away from potential catastrophic results in the market. So having a hedged equity strategy that is protected at all times, not from all losses, but that can protect capital for the most part to a 5 to 10 percent loss mathematically, yet participate in the upside with 70 to 75 percent, we think that’s going to be a very smart, niche area that would be attractive to a lot of people, especially the boomers that are now coming into retirement. If I could project for you five years from now, 10 years from now, and if we think that volatility will spike like it has in the past at different times, having a hedged stock portfolio we think will be part of most firms’ repertoire at some point. It’s not today.
