9 August 2022

How Rising Consumer Prices Present A Reason For Clients To Invest

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Clients are feeling the impact of inflation. They are paying more for many everyday items. TV news tells them some products are in short supply and they may be paying even more. Some clients might want to stay on the sidelines until someone rings a bell announcing it’s time to invest. Here are ways you can be proactive by tapping into their concerns.

Years ago, I met an advisor who made a great case for investing in utilities. Using the electric company as an example, he would ask if he sent them a check every month. The answer was yes. “Wouldn’t it feel great if the electric company sent you a check back to you every quarter?” The client smiled and said yes.

This article is not meant to recommend any specific stocks. Your firm’s research is paramount. You only suggest stocks the firm considers are good buys. Many of these stocks are total return stocks. The client is “paid to wait,” collecting dividends while hoping the stock goes up. Many industries are filled with household names. You could also choose to buy ETFs representing an entire sector or industry.

Eleven Rising Costs To Get Your Client Thinking 

Here are 11 areas where your client would say: “Yes, costs are rising. I feel the pain in my wallet.” You can show them how they can own part of the firm or an industry.

1. Automobiles. Visit a new car dealership and you might be surprised. There are no cars! You’ve seen the ads on TV: You choose the specifications for your car. They “build it for you” and it’s delivered a couple of months later. You hear about people paying sticker price or above to buy a car, if they can find inventory. Is this a good time for your client to own a car company? 

2. Health insurance. Health-care costs have risen faster than inflation for years. Your client sees their premiums rising every year. Deductibles grow at the same time. If your client is complaining about increasing health insurance premiums, would they want to own part of a provider? 

3. Brand name groceries. Consumers see prices rising at the supermarket. They feel comfortable with brand names. Their weekly “shop” costs more and more. They know if money is tight, food is one of the last areas where people will cut their spending. Your client has favorite brands. They think the product is great. Would they like to own some? 

4. Warehouse stores. People feel they get better prices in the big box stores. This also includes home improvement stores and “category killer” retailers. Your client probably shops there. They have difficulty finding parking. Do they own any stock in their favorite stores yet? 

5. Power utilities. It’s that argument for getting a quarterly check back from the people you send a check every month. It’s a regulated industry. What kind of dividends is your local power company paying? Have they increased over time? 

6. Cable companies. Many people still use cable. Those companies have gone into the content production and phone service business too. How much is your client’s monthly cable bill? Has it gone up over the past few years? Do they think the industry has enough potential to justify an investment? 

7. Pharmaceuticals. Turn on your TV. Who are the advertisers? Drug companies come to mind. There are plenty of “ask your doctor about” ads. Any idea what those advertised drugs cost to buy? Check it out online sometime. The population is getting older. Does your firm think pharmaceutical companies have a bright future? 

8. Wireless providers. Everyone has a cellphone. The service to keep them going isn’t cheap. How much is your client’s wireless bill? Do they think the “phone company” is a good investment? What kind of dividends do they pay? 

9. Gasoline. Fuel prices are on the morning news. Everyone watches for them while driving. Places with good prices have long lines. People will need to buy gas as long as they drive cars with internal combustion engines. How does your client feel about gas prices? What do dividends look like in this sector? 

10. Credit card companies. This category includes financial institutions that also issue credit cards. Your client knows what banks pay on money fund balances. Not a lot. They know what credit card interest is too. Which side of the equation do they want to be on? 

11. Logistics companies. Years ago, buying by mail order meant waiting six to eight weeks for delivery. It was spelled out in the advertisements! Today waiting more than two days for delivery is rare. More and more people are buying online. Your client knows “free shipping’' isn’t free because the expense is built into the price. If the volume of shipped items increases, it’s logical someone is making money. What does your research department think about these firms? 

These are industries that touch your client’s everyday life. Many firms are household names. They “understand” how they make money. They don’t think those businesses are going to disappear anytime soon. This might get your client more comfortable with considering your investment recommendations.

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