Margin lending clients can open up a whole new demographic market for advisers, according to Macquarie Bank Equities Lending associate di-rector, Mary Thompson.
Thompson, who has dealt with a growing number of new clients since the launch of Macquarie Margin Lending more than a year ago, says those borrowing to buy shares tend to be much younger, and far less likely to own property than a traditional Macquarie client. They are also far more likely to be male, debt-free and already own a reason-
Margin lending clients can open up a whole new demographic market for advisers, according to Macquarie Bank Equities Lending associate di-rector, Mary Thompson.
Thompson, who has dealt with a growing number of new clients since the launch of Macquarie Margin Lending more than a year ago, says those borrowing to buy shares tend to be much younger, and far less likely to own property than a traditional Macquarie client. They are also far more likely to be male, debt-free and already own a reason-able share portfolio.
“And while they earn less on average than other clients, they often have surprisingly large amounts of cash and shares, particularly the twentysomethings. This group has negligible living expenses and an excellent savings ability when still living at home, which many of them are choosing to do until their late twenties.”
“Margin Lending clients, estimated to number about 30,000 Australians who have currently borrowed about $4 billion, are a largely untapped market for advisers. They often have uninvested cash; are unlikely to have an adviser; and could benefit from a whole range of professional services.
“When we launched the business, we were surprised how different these borrowers were to our other clients,” Thompson says. “Now that we have a more representative sample, we have determined the average age of our margin lending clients to be about 40, up from 30 in our ini-tial months, although many of the striking initial trends we noticed have remained the same.”
A third of Macquarie’s margin lending clients do not own a property. And, for those that do own property, the average value of property they own is quite a lot lower than its other clients.
Thompson says Macquarie believes there are a number of factors behind the trend.
“Children are leaving the family home later and there is a greater tendency to rent rather than buy,” she says. “There is also the nega-tive image of property painted by many financial commentators follow-ing the property slump of the early 1990s and steep property prices rises in many capital cities have impacted on affordability.”
Almost 90 per cent of Macquarie’s margin lending clients already own shares when they apply for a loan, and for those in their twenties, the figure is close to 100 per cent. While some clients use their margin lending facilities to buy managed funds, listed shares are the main focus of its margin lending clients’ investment activities.
“The average share portfolio of a client when they apply for a loan with us is $197,000, a quite substantial figure,” Thompson says. “Even the under 30s have an average of $63,000 in shares when they apply. The average value of share portfolios of our other clients is half this amount. Client margin lending portfolios are almost always well diversified and conservative with very few taking a punt on a one stock portfolio.” Gearing is also conservative, about 41 per cent on average, which is similar to the gearing levels of other ma-jor margin lenders.
Thompson says women are yet to take to margin lending, only making up about 10 per cent of clients.
“We also suspect that women are generally less confident (or perhaps, more realistic) than men in their ability to outperform the market through actively trading a share portfolio.”
Thompson says the significance of these demographic trends should not go unnoticed by advisers, who could profit from more challenging cli-ents in their wealth accumulation stage.
“These clients would also benefit from asset allocation advice, as well as advice about investment in appropriate managed funds,” she says. “The more active traders would benefit from portfolio admini-stration and consolidated reporting services. Finally, margin lending clients do have a lot of uninvested cash, and would benefit from ad-vice on obtaining better returns on these funds. So rather than pre-senting a threat, they may provide a great many opportunities to the advisers who take the time to understand what drives them.”
Ends
