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.
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.
AUTHOR
Malavika Santhebennur
Recommended for you
The strategic partnership with Oaktree Capital and AZ NGA is likely to pave the way for overseas players looking to enter the Australian financial advice market, according to experts.
ASIC has cancelled a Sydney AFSL for failing to pay a $64,000 AFCA determination related to inappropriate advice, which then had to be paid by the CSLR.
Increasing revenue per client is a strategic priority for over half of financial advice businesses, a new report has found, with documented processes being a key way to achieving this.
The education provider has encouraged all financial advisers to avoid a “last-minute scramble” in meeting education requirements prior to the 31 December 2025 deadline.
