How to build high-net-worth client relationships with an SBLOC

How to build high-net-worth client relationships with an SBLOC Apr 22, 2025 9:00:00 AM Learn 5 benefits of offering an SBLOC for your firm, and how clients can leverage this modern borrowing tool to keep their investments working for them. Securities-Backed-Lines of Credit (SBLOCs) are offered by The Bancorp to Betterment clients. Betterment is not a bank. See more below. High-net-worth clients often face the problem of needing liquidity, but not wanting to compromise their long-term portfolios and interrupt their wealth management plans. You can provide the solution to this problem. Offering an SBLOC allows your firm to meet clients’ liquidity needs. 5 benefits of offering an SBLOC for your firm Incorporating SBLOCs into your advisory practice shows your commitment to providing innovative and client-centric financial solutions. Many prospective or current clients may not be aware of what an SBLOC is, allowing your firm to leverage its benefits to: Attract high-net-worth clients: Use the SBLOC in your marketing materials and in conversations with prospective clients. The flexibility to borrow against a portfolio without disrupting investment gains can be a strong selling point to high-net-worth clients. Deepen client trust and increase retention: As you learn about your client’s financial and life goals, you can offer the SBLOC as part of financial planning conversations. Because of its flexibility, an SBLOC is a powerful planning tool that can be used to benefit a client in many situations (more on that below). Retain investment strategies: By providing liquidity without requiring your clients to sell their investments, an SBLOC allows your firm to stick to long-term strategies. This means you can maintain asset allocation for clients, ultimately helping you preserve their portfolios. Add debt management and liquidity into your planning: With an SBLOC, you can proactively help clients incorporate debt into their financial planning. But an SBLOC also gives clients immediate access to funds when unexpected opportunities or needs arise. The ability to use an SBLOC proactively or reactively adds an extra layer of flexibility to your overall wealth management planning tools. Manage both sides of a client’s balance sheet: Offering an SBLOC enables you to address both the asset and liability sides of a client’s financial picture. While clients continue growing their investment portfolios, the SBLOC provides a structured way to manage liabilities, creating a more holistic and balanced financial strategy. Common ways clients use an SBLOC Although not for purchasing securities, clients can use an SBLOC for many purposes—it’s really based on their needs and goals. Here are several practical use cases that you can share with clients: Purchase or renovate a home Clients looking to invest in real estate might not want to disturb their investment portfolios. An SBLOC can provide the funds needed for a down payment or for home renovations, allowing clients to secure or enhance a property while keeping their portfolio intact. It can also serve as a smart bridge loan for buyers, purchasing a new home while their current one is still on the market. Pay inheritance, estate, or income taxes Large tax bills from inheritance, estate planning, or income taxes can strain liquidity. With an SBLOC, clients can cover these obligations without the need to liquidate investments at inopportune times, preserving both their tax strategy and long-term growth potential. Finance business expenses Entrepreneurs and business owners often require flexible financing to cover operational expenses, expansion initiatives, or unforeseen costs. An SBLOC offers a non-disruptive way to access capital, letting them invest in their business while maintaining their personal portfolio strategy. Pay college tuition For clients planning for higher education, an SBLOC can help cover college tuition and related expenses. This solution provides immediate funds, enabling clients to meet educational needs without having to sell investments that could be yielding returns over time. Manage medical bills Unexpected medical expenses can be financially straining. An SBLOC offers a ready source of liquidity to manage high medical bills, ensuring clients can address their healthcare needs promptly while continuing to benefit from a long-term investment portfolio. Pay for a wedding Weddings can be one of life’s most memorable—and costly—events. Instead of disrupting their investment strategy, clients can use an SBLOC to cover wedding expenses, enjoying their big day without sacrificing future financial growth. The Betterment SBLOC process Betterment Advisor Solutions, in partnership with The Bancorp, has streamlined the SBLOC process to ensure a swift and efficient experience for both advisors and clients. Automated application: Clients benefit from a simple, automated application process that can be completed quickly, ensuring access to liquidity when needed. Collateral pledge: Eligible securities held in Betterment taxable legal accounts—including individual, joint, and trust accounts—are pledged as collateral. This protects the client’s portfolio while securing the credit line. Establishing the credit line: The Bancorp assesses the portfolio’s value to determine the credit line. Typically, clients can borrow between 50% and 95%* of the value of their pledged assets, depending on the nature and stability of the investments. Accessing and repaying funds: Once established, the credit line is available for draws as needed. Clients pay only interest on the outstanding balance each month, with the flexibility to repay the principal at any time. Interest rates are variable, tied to the WSJ Prime Rate plus a margin, keeping the financing competitive. Maintaining collateral value: In the event that the value of the pledged securities falls below a required threshold, a maintenance call is issued. This may require a reallocation of the portfolio to obtain higher borrowing power, the deposit of additional funds or securities, or partial repayment of the loan, to ensure the collateral remains sufficient.