Customers on the hunt for margin loans

Staff Reporter / February 1, 2016 / 0 Comments

Many younger clients are showing interest in margin loans as they strive to build wealth to reach goals such as saving for a home deposit, according to Leveraged.

David Arnold, the head of Leveraged at Bendigo and Adelaide Bank, said investor confidence for gearing has been building.

"Almost 80 per cent of our customers intend to maintain or build on their gearing strategy," he said.

And, as appetite grows, the types of customers are changing.

"We're seeing the rise of the unadvised or 'direct' investor and we're seeing younger people with smaller facilities taking up the strategy while others are 'buying the dips' or diversifying an existing portfolio using their margin loan," said Darryl Drown, the head of distribution – direct at Leveraged.

"We're also seeing a rise in the number of younger investors with smaller credit limits, particularly in the east coast capitals. It may be that they realise the need to consider an investment strategy that has the potential to get higher returns than cash in the bank when building wealth to reach goals such as saving for a home deposit."

The low interest rate environment and market volatility also means that investors are looking to take advantage of buying opportunities to acquire blue-chip stocks at reasonable prices.

"Borrowing to invest in shares and managed funds is a strategy that is likely to be one that more financial advisers revisit or at least consider as part of a client's overall financial plan," Mr Drown said.

"Diversification is also a significant driving factor for some investors taking up margin loans. Many people will have significant exposure to 'mum and dad' stocks in their super funds and come to the realisation that they also have the same shares acquired as a result of various demutualisations in their share portfolio as well."

Mr Arnold said that Leveraged was committed to providing education for advisers, and the Investment Trends 2015 Margin Lending Investor Report revealed that Leveraged was the highest rated margin lender in the industry for the Overall Client Satisfaction and number one for Net Promoter Score.

"The survey result is reflective of the great work we have done in the education and communication space, long with enhancements to our overall customer service capability," he said.

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