Smarter investors are driving a margin lending boom, according to a survey of financial planners.
Since 2005, average total borrowings for margin lending have more than doubled to $3 million per planner and almost doubled for line of credit to $3 million, research by Investment Trends commissioned by Colonial Geared Investments found.
Of the 350 advisers surveyed, 80 per cent of planners give advice on margin lending. And half advise on gearing largely recommended margin loans to clients.
“2006 was a seminal year for planner use of margin lending but gearing in general. A lot of the on-going use of gearing and margin lending is really driven by client understanding,” Investment Trends principal Mark Johnston said.
The survey asked planners their views on current prices for various asset classes. In total 56 per cent thought Australian residential property was overvalued and a further 11 per cent considered it highly overvalued.
Advisers identified Asian equities and emerging market equities as assets set for steady growth, the survey found.
Among those advising on margin lending, the median percentage of clients with a margin loan has risen to 11 per cent. The median loan size is $84,000, which is up 12 per cent on last year.
“Margin lending has been around for a number of years now, so its only natural that people are becoming more familiar with gearing solutions,” said Colonial Geared Investments general manager Craig Keary.
Colonial Geared Investments is the lender most used by advisers.
