2015 Margin Lending Investor Report key findings

From
Peker Recep

Peker Recep

In its eleventh year, the 2015 Margin Lending Investor Report is an in-depth study of Australian margin lending users’ attitudes and behaviours. The study is based on a survey of 2,038 investors concluded in August 2015.

Key findings of the Investment Trends 2015 Margin Lending Investor Report:

  • The margin lending industry continued to grow in dollar terms, driven by the strong performance of the direct channel
  • Margin lenders have the opportunity to leverage off the healthy investor appetite for increasing margin debt
  • Enhancements made by margin lenders over the last year saw client satisfaction return to pre-GFC highs. Leveraged takes the lead as highest rated lender by clients

The margin lending industry continued to grow in dollar terms, driven by the strong performance of the direct channel

The number of Australians using margin lending drifted down again, as reported by the RBA. As at September 2015, there are 67,000 active margin lending investors, down 3,000 from 2014.

Despite falling client numbers, the total outstanding margin debt increased 4% to $12.3bn over the year to September. This is an outcome of those who have margin loans borrowing more. The average loan size per margin lending client reached $180,000, up 8% from September 2014 and slightly higher than the pre-GFC high.

“The margin lending industry grew year on year despite turbulent market conditions,” said Recep Peker, Head of Research for Wealth Management at Investment Trends. “The performance of the direct channel is underpinning the growth in total outstanding margin debt, while the intermediary/advised channel has remained relatively flat.”

Self directed margin loans now comprise 45% of outstanding debt, up from 34% in September 2010.

Margin lenders have the opportunity to leverage off the healthy investor appetite for increasing margin debt

Investor appetite for increasing margin debt remains healthy, with both current and potential margin lending investors viewing recent share market falls as a gearing opportunity. More than half (56%) of margin lending users agree Australian shares are undervalued following recent falls in the market, up from 31% in 2014. Notably, only 13% say recent volatility holds them back from using margin lending.

“Margin lending investors as a group tend to be the most optimistic in their share market outlook, and recent share market falls are seen as investment opportunities for many,” said Peker.

“For advisers involved with margin lending, it is important to note that how investors use margin lending is evolving – they are becoming more technical in their approach to margin lending,” said Peker. “More are recognising the tax benefits of margin lending, seeing it as a part of their broader portfolio strategy, and understanding they can use it for assets other than just direct shares.”

Our modelling estimates there to be 96,000 investors who are not currently using margin lending but are planning to begin doing so in the next 12 months.

“They are excited about margin lending for the diversification benefits offered, but tend to be more concerned about market volatility than current margin lending investors,” said Peker. “This presents an opportunity for both financial planners and stockbrokers, as many of these investors are seeking education and guidance before entering the market.”

Enhancements made by margin lenders over the last year saw client satisfaction return to pre-GFC highs. Leveraged takes the lead as highest rated lender by clients

Users’ loyalty and satisfaction have both increased as lenders improve their offerings. Clients are giving margin lenders higher ratings across a number of key satisfaction drivers, notably website and APLs. This has translated into satisfaction with margin lenders returning to pre-GFC levels.

Leveraged has climbed to top spot for overall client satisfaction with margin lender, and is followed closely by CommSec and BT Margin Lending.

BT Margin Lending has had the strongest growth in satisfaction overall, jumping four places, driven by ease of transacting through better integration with the online broking portal, interest rate improvements and increasing satisfaction with statements/tax reporting.

In terms of market share, both CommSec (39%, the biggest) and ANZ Investment Lending (17%, second biggest) captured a greater share of most recent margin loans. They have been successful in leveraging their strong brands and existing relationships to grow their market share over the last 12 months.

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