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.
Key findings of the Investment Trends 2015 Margin Lending Planner Report:
- Client interest in margin lending has sustained financial planners’ margin loan recommendations
- More planners intend to recommend margin lending, citing client best interest
- CommSec Adviser Services continues to lead the industry by number of relationships, while Leveraged takes the lead in planner satisfaction with margin lender
Client interest in margin lending has sustained financial planners’ margin loan recommendations
The proportion of financial planners recommending margin lending to their clients remained unchanged from 2014 levels, despite recent market volatility, with 42% doing so. Margin lending usage is being sustained by increasing client demand for gearing, with 31% of financial planners who recommended a margin loan in 2015 saying the loan was instigated by the client, up from 21% saying so in 2014.
“Clients feel the markets are undervalued again and see opportunities where financial planners may not,” said Recep Peker, Head of Research for Wealth Management at Investment Trends. “Investors’ need for support, both around education and loan establishment has encouraged more to turn to financial planners to obtain a margin loan.”
“We’re seeing a repeat of 2012, where the proportion of loans instigated by clients also spiked after a turbulent year in the markets.”
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.
More planners intend to recommend margin lending, citing client best interest
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.
CommSec Adviser Services continues to lead the industry by number of relationships, while Leveraged takes the lead in planner satisfaction with margin lender
Financial planners are consolidating the number of margin lender relationships they have as they become more demanding of lenders. 55% of current margin lending users now recommend loans solely from one lender, up from 42% in 2014.
Helping increase efficiency and good support are becoming increasingly important drivers of lenders’ success with financial planners. The top three lenders by share of primary planner relationships are:
1. CommSec Adviser Services
3. NAB Equity Lending
Leveraged saw the largest gain in satisfaction between 2014 and 2015. Leveraged’s focus on BDM support, platform usability, online applications and communications have enabled them to take the lead in planner satisfaction.