Financial planners give margin lending the cold shoulder
Things are not looking up for margin lending as recent data shows the sector was given a cold shoulder by financial planners yet again.
Recent Reserve Bank of Australia figures point to the total margin lending industry shrinking from a high of $42 billion four years ago back down to 2005 levels of $16 billion.
Moreover, two-thirds of financial planners who previously used margin lending were either unlikely or adamant that they would not start using this form of borrowing in the next year, according to the Investment Trends December 2011 Margin Lending Financial Planner Report.
Margin lending no longer makes up the largest share of funds borrowed for investments via financial planners, falling by 2 per cent to 27 per cent in 2011.
It was surpassed by line of credit, which was steady at 28 per cent, while geared share funds, structured products and instalment warrants all recorded relative increases over the past 12 months.
According to the Investment Trends report, financial planners cited recent market volatility levels, high interest rates and risk of margin calls as main barriers to margin lending.
But the vast majority of those surveyed (who currently use margin lending) expressed high interest in so-called 'no margin call loans'.
"Given that just 11 per cent of planners cited the lack of a no margin call loan as a barrier to recommending margin lending to clients or doing it more often, it is likely that this feature is mainly desired in order to address clients' fear factor," the report stated.
Recommended for you
Licensing regulation should prioritise consumer outcomes over institutional convenience, according to Assured Support, and the compliance firm has suggested an alternative framework to the “licensed and self-licensed” model.
The chair of the Platinum Capital listed investment company admits the vehicle “is at a crossroads” in its 31-year history, with both L1 Capital and Wilson Asset Management bidding to take over its investment management.
AMP has settled on two court proceedings: one class action which affected superannuation members and a second regarding insurer policies.
With a large group of advisers expecting to exit before the 2026 education deadline, an industry expert shares how these practices can best prepare themselves for sale to compete in a “buyer’s market”.
