Advisers looking to gearing across client base

Investment Trends’ 2018 Margin Lending Adviser Report revealed that the vast majority of stockbrokers (73 per cent) and financial planners (83 per cent) believe that gearing has a role to play in their clients’ portfolios.

Stock brokers and financial planners most often believe gearing is appropriate for their high-net-worth clients (those with $1 million+ in investable assets), affluent clients ($250,000 to $1 million) and accumulators (aged 35-49).

Investment Trends analyst John Carver said advisers believe a wide range of client types can take advantage of gearing, not just young investors looking to accelerate the growth of their investments in the accumulation phase.

But despite many advisers recognising the benefits of gearing, Mr Carver added that enthusiasm for products such as margin lending has declined.

“Heightened market volatility has certainly held back many advisers from increasing their gearing advice, and instead we are observing a greater proportion of clients themselves prompting their adviser to use these products in the first place,” Mr Carver said.

“Given the challenging market conditions, advisers and their clients will be assessing gearing product providers even more closely. Providers will have to demonstrate and clearly articulate their proposition, not only from a cost perspective, but also their service levels and quality of communications.”

The report also found that stockbrokers and financial planners are repositioning their service offering from stock picking to that of asset allocating as they adjust to evolving investor needs.

HNW investors increasingly desire more than just domestic equities advice from stockbrokers, however only 33 per cent of brokers intend to position themselves as stockbrokers to their clients in 12 months’ time.

Instead, 25 per cent are looking to call themselves wealth managers, 14 per cent investment managers and 13 per cent financial advisers.

The report said that in line with evolving client needs, stockbrokers and financial planners anticipate significant changes to the products they recommend, moving particularly towards solutions that provide diversification, low cost and require less admin and paperwork.

“The growth in the use of ETFs and managed accounts among advisers reflects their quest to expand their service offering and align their proposition more closely to their clients’ needs,” Mr Carver said.

“We expect this trend to persist as advisers increasingly prioritise diversification and capital preservation when selecting investments for clients.”

The study is based on a survey of 766 financial planners and 223 stockbrokers who provide financial advice, and concluded in November 2018.

Adrian Flores

Adrian Flores is a deputy editor at Momentum Media, focusing mainly on banking, wealth management and financial services. He has also written for Public Accountant, Accountants Daily and The CEO Magazine.

You can contact him on [email protected].