Planners warned about margin lending

Financial planners have been warned they risk failing recommended fiduciary requirements to act in their clients’ best interests if they choose not to advise on margin lending products after new legislation is introduced.

“If you [aren’t able] to provide advice or understand the impact of any particular product, how are you fulfilling your fiduciary requirement?” asked Eric Blewitt, general manger of Bendigo and Adelaide Bank subsidiary Leveraged Equities.

“[The legislation] could be seen as an opportunity to not advise on [margin lending], [but] it would be an interesting decision, because concurrently ... there is a suggested and recommended requirement for advisers to have a fiduciary requirement to act in [their] clients’ best interests.”

Matthew Moses, partner at McMahon Clarke Legal, said it was possible that as a result of advisers not considering margin lending in their financial advice they would fail requirements to act in their client’s best interests.

“The legislation goes with the policy that the Australian Securities and Investments Commission publishes in relation to the training and knowledge requirements you have to meet to be authorised to give advice on margin lending ... so I think new training requirements that people are suddenly going to have to meet might dissuade some participants in the industry from continuing to give advice in that area,” Moses said.

“They may decide it’s all just too hard and the requirements are too onerous,” he added.

However, the legislation had not yet been tested, Moses said.

For more on margin lending, see the feature in this week's Money Management.