Over the past three years there has been a great deal of discussion about the existence of a so-called ‘insurance gap’ in Australia.

Amid the current dramas in the market, perhaps it is time to start talking about debt.

The financial services industry needs to start talking about debt because, overwhelmingly, those most negatively affected by the recent plummet in the market were those who were heavily leveraged.

Indeed, it is now clear that a number of high-flying executives within financial services firms have come to grief because of the degree to which they are leveraged. If they can’t get it right, then who can?

A few weeks ago, Money Management reporters spoke to a number of planners about the levels of debt being carried by their clients and whether those clients had been subjected to margin calls. The overwhelming response was one of denial.

Those planners that did acknowledge advising their clients to take out margin loans, insisted they had done so on the basis of highly conservative gearing ratios, sufficient to buffer the aforementioned clients from the vicissitudes of the market.

But the question those planners must now ask themselves is how well their clients understood the mechanics of margin lending and the downsides that flowed from a falling market.

That question needs to be asked in the context of margin lending now being a mainstream strategy when, a mere 10 years ago, it was seen as more suited to sophisticated investors.

And in circumstances where some heavy losses have been encountered with respect to structured products, perhaps it is time for the financial planning industry to undertake an audit of what is and is not appropriate for particular clients.

What seems certain is that this latest market decline will be accompanied by increased scrutiny on the part of the regulators in circumstances where, over recent years, those same regulators have expressed concern about the complexity of products increasingly being offered to retail investors.

The only thing remarkable about this market downturn is that it has come at the end of one of the longest-ever bull runs. Those who are inexperienced will be given to panic. The older heads will know that adherence to the fundamentals will always overcome adversity.

– Mike Taylor