Brokers ahead of planners on margin loans
Australian stockbrokers have surpassed financial planners in their ability to embrace gearing strategies, with a new report claiming a large percentage of the broking industry is now advising clients on margin loans.
According to the Investment Trends/Colonial Geared Investments Margin Lending: Broker Report, more than three-quarters of brokers who advised clients on gearing identified margin loans as their most used form of leverage in 2006. This figure compares with Investment Trends’ earlier survey of financial planners, which found just over two-thirds primarily used margin loans.
“Like planners, Australia’s brokers felt the increase in popularity of margin loans was primarily a result of better client understanding, and that this increase in awareness had been a key driver of increased use of margin loans,” said Investment Trends director Mark Johnston.
The report also found that the main reason brokers were recommending margin loans was because of their benefits in leverage and wealth creation.
“There were a range of secondary benefits identified, such as flexibility and the unlocking of capital, but nearly 80 per cent of brokers saw the main benefit of margin loans as being either leverage or long-term wealth creation,” Johnston said.
The survey also looked at which providers of margin loans were used, and found that lender market shares for brokers have been reasonably stable. Unlike financial planners however, brokers often select from a roster of two or three margin lending providers.
“For the full service broker channel, Leveraged Equities and Macquarie were used as a primary lender by two-thirds of brokers” Johnston added.
“Just under a third of brokers indicated that they were not interested in changing providers — although the main driver which could cause a change was lower interest rates.”
Brokers were also more optimistic about Australian equities than their financial planner counterparts.
“Brokers were expecting strong growth from both Asian and Australian equities and emerging markets in 2007. This compares to a recent survey we conducted with financial planners where only 3 per cent identified Australian equities as a strong growth area,” Johnston said.
Investment Trends/Colonial Geared Investments’ Margin Lending: Broker Report surveyed 350 full service brokers in December last year.
Recommended for you
AZ NGA has partnered with an Adelaide-based accounting and financial planning practice as it expands its presence in South Australia.
The central bank has released its decision on the official cash rate following its November monetary policy meeting.
ASIC has cancelled the AFSL of a Melbourne-based managed investment scheme operator over a failure to pay industry levies and meet its statutory audit and financial reporting lodgement obligations.
Melbourne advice firm Hewison Private Wealth has marked four decades of service after making its start in 1985 as a “truly independent advice business” in a largely product-led market.
