In the 2015 Margin Lending Planner Report, Investment Trends revealed that 31 per cent of financial planning clients utilised margin lending in 2015, up from 21 per cent in 2014.
Investment Trends’ head of research, wealth management, Recep Peker said: “Clients feel the markets are undervalued again and see opportunities where financial planners may not.
“We’re seeing a repeat of 2012, where the proportion of loans instigated by clients also spiked after a turbulent year in the markets,” he said.
The report found that nearly 50 per cent of financial planners intend to recommend margin lending to clients over the next 12 months. Of this group, 53 per cent cite client best interests as being behind the increase – up from 30 per cent 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,” Mr Peker said.
“Overall, with financial planners targeting this advice at a more sophisticated clientele, margin lending is becoming a more common wealth creation strategy.”
Investment Trends argued that product innovation is needed to expand the margin lending market. Specifically, “as an outcome of the increasingly strategic approach to margin lending, financial planners are seeking a wider range of gearing products from lenders”.
The report also noted that the average margin loan administered by financial planners is 77 per cent larger in dollar terms than the average direct loans that an investor has established individually.
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