Macquarie Bank has launched a new initiative encouraging Australian investors to use debt as an effective way to accelerate wealth creation.
The Lifetime Lending booklet provides an overview of various lending options that advisers can use when working with their clients that may offer more attractive alternatives or act as a complement to the simple mortgage, for example.
According to Macquarie, options such as instalment gearing, protected lending, debt consolidation and debt recycling carry with them the potential for higher returns, the ability to achieve greater diversification and lower risk compared to more traditional debt vehicles.
Macquarie Mortgages business development manager Hayden Thorpe urged advisers to consider different lending strategies when constructing a portfolio.
“Lifetime Lending is about taking a holistic view of not only your existing client base but also your potential client base,” he said.
“We believe by looking after lending needs advisers tend to have more satisfied clients.
“Making debt management an integral part of what you are looking after for your clients is powerful and can increase the profitability of that client to you and your business.”
Such advice is particularly pertinent when looking at Australia’s debt appetite, which includes $31 billion in credit card liability — a figure that is 500 per cent more than what it was 10 years ago.
However, according to Macquarie, the value of our homes has also significantly increased over the same time period, meaning investors would already be familiar with the concept of using debt to create wealth.
“Seventy per cent of Australians own their own home and one in five of those people also own another property, and in the last few years we have seen a big increase in the amount of people using debt,” Thorpe said.
“This is an opportunity for advisers to provide debt advice along with the investment advice they already provide to their clients.”
Thorpe added that this debt environment suggested the nation’s lending needs were no longer limited to one age bracket.
“Historically, in terms of lending, advisers tend to look at the middle ground (45-55 years) … but the way we look at it is that it doesn’t need to be this way,” he said.
“Our philosophy is looking at what debt needs the client has from their early 20s, when most people use some form of debt, through to their later years.”
He warned though that while there were many situations where a client could use debt in a proactive way, not all clients were the same and that a single strategy would not be suitable for everyone.
