Client demand spikes for margin loans
Increasing client demand for gearing is driving the sustained usage of margin lending, with 31 per cent of financial planners who recommended a margin loan in 2015 saying it was initiated by the client, up from 21 per cent in 2014.
Investment Trends' ‘2015 Margin Lending Planner Report' found 42 per cent of financial planners continued to recommend margin lending to their clients, unchanged from 2014 levels despite recent market volatility.
Head of research for wealth management, Recep Peker, said the pattern was a repeat of 2012, where client demand for margin loans increased after a volatile year in markets.
"Clients feel the markets are undervalued again and see opportunities where financial planners may not," he said.
"Investors' need for support, both around education and loan establishment has encouraged more to turn to financial planners to obtain a margin loan."
Nearly half of the 417 planners surveyed who recommended margin loans were looking to increase their usage of margin lending over the next 12 months, with 53 per cent saying clients' best interest was the reason, up from 30 per cent in 2014.
They were also looking for a wider range of gearing products from lenders, which meant product innovation could expand the market.
The average margin loan arranged by a financial planner was 77 per cent larger in dollar terms than the average direct loan established by the investor themselves.
While gearing levels had become more constrained, with the average margin loan loan-to-value ratio dropping from 51 per cent in 2014 to 46 per cent in 2015, increased client demand meant planners were writing 15 per cent more loans each on average compared to 2014 levels.
Recommended for you
With the highest number of candidates in a year sitting the latest financial advice exam, a surge of new entrants are expected in the coming weeks, according to Wealth Data.
AMP has launched a range of five diversified index managed portfolios on its North investment platform, targeting a younger client demographic.
An NSW adviser, who advised over 120 clients after falsifying her financial advice exam results, has been permanently banned by ASIC.
ASIC has released the results from the latest financial adviser exam, the first to be run since changes to its structure earlier this year.
