In its twelfth year, the 2016 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 1,418 Australian-based investors conducted between July and August 2016 by research firm Investment Trends.
Key highlights from the 2016 Margin Lending Investor Report:
- The margin lending industry contracted slightly following a turbulent year in the markets
- Margin lending investors have become more savvy risk managers, and have a stronger intention to borrow more through margin loans
- With satisfaction falling slightly, the intention to switch providers increased in 2016. Margin lenders could use this as an opportunity to capture high value clients
- CommSec joins Leveraged to become the industry’s highest rated margin lenders
The Australian margin lending industry contracted slightly in 2016, following another year of volatility in equity markets. Both the number of active margin lending accounts and margin debt outstanding fell by 5% in the 12 months to 30 June 2016 (to 63,738 and $11.8 billion, respectively), according to the RBA.
At the time of this study, the average investor was expecting the share market to deliver capital gains of just 2.6% in the next 12 months, down from 4% in 2015 and 6% in 2014.
The margin lending industry continues to face headwinds from turbulent share market conditions, and the resulting bearish sentiment among investors,” said Recep Peker, Research Director at Investment Trends. “Despite this adversity, it is noteworthy that the number of margin lending investors fell at the slowest annual rate since the GFC.
Despite generally conservative settings, the intention to increase margin lending debt among investors who already have a margin loan was stronger in 2016 than in 2015. This positivity comes amidst an industry-wide surge in attention to risk management. Current margin lending investors are actively managing both their own risk profile and risks related to the market.
The investment opportunities revealed by depressed markets is enticing a greater share of margin lending investors to consider borrowing more through their margin loan,” said Peker. “They want to increase margin lending borrowings to achieve their outcomes while paying a lot of attention to managing risk.
An active focus on risk management while striving to gain leveraged exposure presents opportunities for lenders and financial advisers who can support these investors,” he added.
Half of margin lending investors currently believe Australian shares are currently undervalued. The study highlights a range of promotions, incentives and product features that could be effective in assisting investors in acting on their intentions.
With satisfaction falling slightly, the intention to switch providers increased in 2016. Margin lenders could use this as an opportunity to capture high value client relationships
Switching intentions among current margin lending investors have been low and falling for many years. However there was a reversal in this trend in 2016, with more margin lending clients looking for a new lender this year than in 2015.
Satisfaction among current margin lending investors fell slightly to an average score of 67% from 69%, driven mainly by key underserviced areas outlined in the report. Satisfaction among high value clients – those with margin loan balances of over $250,000 – has also fallen.
Lenders would benefit greatly from taking a targeted approach to meeting the growing needs of high value margin lending clients, notably through their communications,” said Peker.
In an environment where client satisfaction is becoming increasingly critical, CommSec joins Leveraged to become the industry’s highest rated margin lenders. CommSec also boasts the highest conversion rates of the industry.