Clients asking planners for margin loans
Tuesday, 8 March 2016 12:50pm

Almost a third of planners (31%) who recommended a margin loan in 2015 said the loan was instigated by the client, according to new research by Investment Trends, up from 21% in 2014.

In its eleventh year, the 2015 Margin Lending Planner Report is an in-depth study of financial planners' usage of and attitudes towards margin lending. The study is based on a survey of 417 financial planners concluded in November 2015.

The increasing client demand for gearing is helping to sustain the use of margin lending, which remains flat in 2015, despite tricky markets, with 42% of planners recommending loans.

"We're seeing a repeat of 2012, where the proportion of loans instigated by clients also spiked after a turbulent year in the markets." said Investment Trends head of research for wealth management, Recep Peker.

"Clients feel the markets are undervalued again and see opportunities where financial planners may not. Investors' need for support, both around education and loan establishment has encouraged more to turn to financial planners to obtain a margin loan."

As a result of increased client demand, planners who recommend margin lending are writing 15% more loans each, on average, versus 2014. However, gearing levels have become slightly more conservative, with the average margin loan LVR falling from 51% in 2014 to 46% in 2015.

Nearly half of planners who recommend margin lending intend to increase their usage of margin lending across their client base over the next 12 months. Compared to 2014, the drivers of increased future usage of margin lending has changed significantly. Most notably, 53% cite best interest of clients, up from 30% in 2014.

"There has been a sharp increase in the proportion of planners saying client best interest is the reason for intending to increase their usage of margin lending," said Peker. "Overall, with financial planners targeting this advice at a more sophisticated clientele, margin lending is becoming a more common wealth creation strategy."

The average margin loan administered by financial planners is 77% larger in dollar terms than the average direct loan that an investor has established themselves.

As an outcome of the increasingly strategic approach to margin lending, financial planners are seeking a wider range of gearing products from lenders. Product innovation could expand the market.

Link to something VlKqp7dB