Brokers are the fastest growing margin lending channel: Investment Trends 2015 Margin Lending Broker Report

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Peker Recep

Peker Recep

In its ninth year, the 2015 Margin Lending Broker Report is an in-depth study of Australian full service stockbrokers’ attitudes and behaviours towards margin lending. The study is based on a survey of 234 full service stockbrokers concluded in December 2015.

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

  • Brokers are the fastest growing margin lending channel and have nearly overtaken financial planners by total level of outstanding margin debt
  • Clients are driving more of the margin loans that are organised by brokers
  • Leveraged continues to lead the industry by number of relationships and overall satisfaction

Brokers are the fastest growing margin lending channel and have nearly overtaken financial planners by total level of outstanding margin debt

As reported by the Reserve Bank of Australia (RBA), the margin lending market continues to recover from its 2012 lows and stands at $12.1 billion as of December 2015. Full service stockbrokers are gaining a greater share of this market and now constitute 28% of all outstanding margin debt, up from 22% in 2011.

Outstanding margin debt in the broker channel increased 7% over the year to December 2015 to $3.45bn. Over the same period, margin debt held by financial planners grew just 1% to $3.47bn and the direct channel grew by 1% to $5.19bn.

“The margin lending industry has rebalanced since the GFC,” said Recep Peker, Head of Research for Wealth Management at Investment Trends. “The majority of margin loans are now procured directly by investors, while the financial planner and stockbroker channels have reached parity in terms of outstanding debt.”

“The profile of investors in each channel is quite different, with stockbrokers typically servicing the wealthier end of the client spectrum.”

Clients are driving more of the margin loans that are organised by brokers

Investors are playing an even greater role in driving stockbrokers’ margin loan recommendations. Significantly more stockbrokers than last year (73%, up from 52%) say the most recent margin loan they wrote was instigated by their client.

“Full service stockbrokers have the opportunity to be proactive by expanding the margin lending conversation to more of their clients,” said Peker. “Our research shows investors are becoming increasingly sophisticated in their approach to margin lending, including recognising the diversification and tax benefits, and seeing it as part of a broader portfolio strategy.”

“Stockbrokers could take advantage of this increased client understanding by incorporating gearing into their clients’ holistic strategy.”

Leveraged continues to lead the industry by number of relationships and overall satisfaction

Stockbrokers’ satisfaction with their main margin lender increased from last year’s levels. They are giving margin lenders higher ratings across most key areas, notably speed of application process, integration with their main platform, and reliability and accuracy of reporting.

Leveraged has solidified its lead in overall broker satisfaction with margin lenders following last year’s rebrand, the relaunch of their website and their continued focus on service.

In terms of market share, Leveraged continues to hold the majority of primary relationships with stockbrokers (55%), followed by St George Margin Lending (9%) and ANZ Investment Lending (8%).

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