Margin lending advice too hard, say planners

margin-lending/investment-trends/margin-loans/planners/financial-planners/

30 January 2014
| By Staff |
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Recent regulatory changes have made the provision of margin lending advice less attractive, according to one third of planners surveyed by Investment Trends.

Almost 15 per cent of respondents said they might stop using margin loans as a result of regulation, which represents 1000 planners at risk of exiting margin lending advice altogether.

According to the Investment Trends November 2013 Margin Lending Planner Report, financial planners withdrew from margin lending advice despite the improved market outlook.

The proportion of planners advising in this area fell from 55 per cent in 2012 to 45 per cent in 2013, with the total outstanding margin debt from the financial planner channel falling by 13 per cent to $4.4 billion.

"It is evident from our research that the impact of regulatory reform has not yet finished playing out. Further help from margin lenders with compliance and new licensing requirements is essential in order to stop the outflow in the planner channel," said analyst S M Shahed.

However, in line with the improved market sentiment, the direct investor channel has begun to improve with an outstanding debt of $4.7 billion in September 2013 — up $480 million since December 2012.

"A push from planners could certainly help grow the margin lending market, as a large proportion of loans written by planners are new loans rather than a shift of clients between lenders," Shahed said.

"Only one quarter of recent margin loans established by planners were replacement loans. In contrast, two thirds of the recent loans established by direct investors were replacement loans."

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