FPA chief defends margin lending

margin-lending/financial-planning/storm-financial/financial-planning-businesses/global-financial-crisis/chief-executive/hedge-funds/FPA/

16 January 2009
| By Lucinda Beaman |

The chief executive of the Financial Planning Association (FPA), Jo-Anne Bloch, has defended margin lending as an investment strategy in the midst of the closure of Storm Financial.

Speaking earlier this week, prior to the official closure of the business by voluntary administrators yesterday, Bloch said while margin lending is a model that has risks, it is one that “people have done extremely well out of”.

“If you start pointing fingers at Storm and their business model then you’re going to have to start looking at a whole range of other issues like hedge funds and all sorts of other instruments,” Bloch said earlier this week.

“I don’t think we’re quite close to running a nanny state just yet, where we determine what’s good and what’s bad; I think people need to go into these things with their eyes wide open.”

Bloch said it’s important for investors to understand that “for all the risk and return there are ups and there are downs, and that’s what we’re facing at the moment”.

The voluntary administrators of Storm Financial yesterday sacked Storm’s 115 staff members and announced the closure of the business.

The business has been closed due to “trading losses being incurred at a rate which the company could no longer absorb”, the voluntary administrators said.

Bloch said while the Storm situation had unique qualities, all financial planning businesses are under some form of pressure as a result of the global financial crisis.

“I think there are plenty of other clients and financial planners invested in shares who are also hurting,” Bloch said.

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