Banks to dominate margin lending

Westpac Financial Services has predicted banks will dominate the margin lending market within three years.

Westpac Financial Services has predicted banks will dominate the margin lending market within three years.

At a launch for its own margin lending product, head of retail financial services Michael Migro said banking groups with large client bases would become the new players in this market, though “investment banks and stockbrokers will still have a role to play”.

“Inside of three years, the largest provider of margin lending will be a bank,” Mi-gro said.

Westpac Financial Services’ new lending product is targeted specifically to the lower to mid-end of the market. The minimum investment is $20,000 with a 10 per cent buffer zone and loan to value ratio of up to 70 per cent. Customers choose their investments from a list of 400 approved securities, including managed funds.

The new product mirrors the approach taken by discount lender Commonwealth Securities, which has successfully targeted the lower end of the market. Tradition-ally, margin lenders have concentrated their efforts on winning over the high-net-worth client, something Westpac’s private banking division is doing with their year-old margin lending product.

Westpac Financial Services marketing chief Chris Crawford says the new service will be distributed through Westpac’s 580 inhouse planners nationally and that it would “round out our product suite for planners”.

Migro says the product provides valuable tools for people earning a salary of be-tween $40,000 and $50,000, provided they sought financial advice.

“Margin lending is not for everyone. You have to have risk tolerance and an in-vestment horizon of at least three years, but we do recommend you get financial advice along the way,” Migro said.

Current interest rates ranged from 7.45 to 8.8 per cent per annum. Crawford also said there was no establishment fee on the product, with the first 30 transactions being free.