Brokers becoming the go-to for margin lending

Brokers are now the fastest growing margin lending channel, and are almost on par with financial planners by total level of outstanding margin debt, Investment Trends research showed.

The 2015 Margin Lending Broker Report revealed outstanding margin debt in the broker channel rose by seven per cent over the year to December 2015 to $3.45 billion, while margin debt held by financial planners grew only by one per cent to $3.47 billion.

Meanwhile, the survey of 234 brokers showed more stockbrokers (73 per cent, up from last year's 52 per cent) said recent margin loan recommendations were driven by clients and investors.

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Head of research for wealth management, Recep Peker, said stockbrokers had an opportunity to increase their margin lending conversations with more clients by including gearing in their holistic strategy.

"Our research shows investors are becoming increasingly sophisticated in their approach to margin lending, including recognising the diversification and tax benefits, and seeing it as part of a broader portfolio strategy," Peker said.

Leveraged continued to lead in overall broker satisfaction with margin lenders after last year's rebrand, and the relaunch of their website, and it also held the majority of relationships with stockbrokers (55 per cent), followed by St George Margin lending (nine per cent) and ANZ Investment Lending (eight per cent).

Head of Leveraged, David Arnold, said the fact that clients initiated recent margin loans with their stockbrokers pointed to significant unmet need, adding that investors were probably heading straight to stockbrokers because of less servicing from financial planners.

He also said investors may be keener to invest in shares as a result of reduced appetite to borrow to invest in property.

"Young, mobile career builders can use the strategy to rent where they want to live while steadily building a portfolio of shares that can pay reasonable dividends," Arnold said.




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Comments

Comments

I'm not surprised. My broker is free to ring me up suggest buying a share because they are cheap at present. 2 minutes later the deal is done. No SOA, fact find etc. They operate in a different regulatory framework that is significantly more relaxed. Plus my AFSL limits my ability to setup new Margin loans because of PI insurance.... The Nanny state continues, while we wonder why our economy is stagnating and tax income is falling and the deficit is increasing..... Whoops another manufacturer is closing because it is too hard to do business in Australia.

I smell robo-advice and margin loans being sold direct to consumer, bypassing traditional adviser channels. I remember the GFC and the commentary saying advisers were idiots for recommending gearing in shares. Not to mention advisers and clients getting shafted by plunging LVRs on securities and managed funds. Advisers just can't move quick enough, shackled by BS risk profiles, complex SOAs and ROAs.

I agree Gez, but who do the authorities blame next time there is a down turn? Our Nanny state means the individual is not responsible and we have to blame someone.......

That's when the class action lawyers move in Robin and blame the institutions for slick marketing and not providing personalized advice and 6 inch font warnings on application forms.

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