Clients often ask us about investing in a second home, renovating a preexisting property, expanding their business, paying expenditures such as taxes or tuition, or helping a loved one with a financial need. For instance, a client recently called with the desire to help the youngster with the down payment on an initial home. To raise the money, clients must liquidate some of their securities profile often, potentially incurring adverse tax consequences and disrupting their long-term stock portfolio strategy.
Clients may be hesitant to dip into their investment portfolio to invest in these aspirations as their life-time goals may be affected. Our response to your client: Have you contemplated tapping the value of your investment take into account borrowing? Securities-based borrowing gives you access to money predicated on the worthiness of your non-retirement investment stock portfolio. Charles Schwab, our custodian for client property, has helped our clients with a forward-thinking strategy called the Pledged Asset Line.
- ► October 2010 (4)
- Buy a residence that you can afford comfortably
- 3Find your market worthy of with a report tailored to you
- IRF 10 yrs or even more: 2.82% in April 2019, down from 2.88% in a year earlier
- Is your financial planner helping you with other strategies
- 8S. Rep. No. 100–19 at 31; Conference Report at 123. Go back to Text
Schwab Bank’s Pledged Asset Line (PAL) is a flexible borrowing solution that will help clients leverage the value of their investments through a revolving credit line. This type of borrowing may be simpler to obtain and more cost-effective than other alternatives. A Pledged Asset Line is a non-purpose revolving line of credit from Schwab Bank secured by eligible assets held in a separate Pledged Asset Account (PAASB) maintained at Charles Schwab & Co., Inc. (Schwab).
A PAASB is a Schwab brokerage account that keeps non – pension possessions pledged as guarantee for the Pledged Asset Line. As the PAASB holds guarantee for the Pledged Asset Line, it is treated as a cash or non-margin account. You can lose more property than you are required to deposit in your guarantee account. The lender can power the sale of securities in your collateral account to satisfy your Pledged Asset Line obligations. Your security account also secures any responsibilities owed to Schwab.
You are not eligible or choose which securities in your accounts are liquidated or sold if you fail to meet a collateral maintenance call. You aren’t entitled to an extension of time to meet a collateral maintenance call. You may incur undesirable tax outcomes if your securities are sold, regarding the pledge of securities as loan security. In our view, providing clients with the ability to stay fully invested while meeting a brief term expense can be an invaluable tool. We are happy to help you explore the options available through Schwab Bank’s Pledged Asset Line (PAL).
All of this information proceeded to go into developing an employing system of our own, which we called “Meticulous Hiring”, that is still used today. The systems and processes we developed had an immediate impact on the quality of new hires and early management turnover. Do you foresee any nagging problems? Of course there would be problems.