The number of advisers with margin lending authorisation is surprisingly low, although this may be due to continuing conservatism, according to Claire Wivell Plater (pictured), managing director of Gold Seal Risk Management Services.
Wivell Plater said that according to statistics on the number of margin lending authorisations, released by the Australian Securities and Investments Commission as at the beginning of November 2010, only 781 licensees applied for margin lending authorisation. These applicants described their business activities as ‘adviser’, ‘financial planner’, ‘margin lender’ or ‘securities dealer’.
“There are quite a lot of planners that do operate quite conservatively,” said Wivell Plater, adding that many were steering clear of gearing or perhaps more were opting for geared funds that do not involve a margin loan.
However, she felt that the low statistics did seem odd, since the strategy of borrowing to put money into managed investment schemes had been around for a long time and the whole structured investment market was designed around gearing.
“I suspect it’s just the conservatism around all that,” she said. “Perhaps it’s got something to do with the way the markets are at the moment, and when we have another bull market people might change their minds.”
Wivell Plater was concerned that the low number might also be a symptom of a lack of awareness among advisers, although she felt it probably had more to do with conservatism.
The conservative attitude of advisers was understandable, said Wivell Plater, adding that their attitude would change as the markets improved. However, she said one of the key concerns for advisers in the next year was uncertainty in the markets and finding suitable strategies for their clients. Added to that was uncertainty as to how conservative advisers and clients should be, she said.
“I know that there are some planners that have still got all their clients in cash because they’re still waiting for some sort of certainty. But there’s a real issue whether that’s appropriate for the client, given that we have seen some market advances,” Wivell Plater said. “Strategy selection is probably the most challenging thing for advisers at the moment.”
