Margin lending is on the rise among stockbroking clients after the pain wrought by the global financial crisis, but investors are erring on the conservative side of gearing, according to experts.
ANZ managing director of investment lending David Crundall said most of the recovery in volumes had been in the broking space.
"There has been a drop-off in financial planners' and private bankers' willingness to put clients into gearing solutions," Mr Crundall said yesterday. "Brokers have been more willing to jump back in because typically their clients are more sophisticated with a higher risk appetite."
Margin lending client numbers at ANZ remained at pre-GFC levels but gearing had fallen from about 50 per cent to 40 per cent. Volumes had increased about 20 per cent since March 2009, after falling off 30 per cent from the heights of the GFC, Mr Crundall said.
"The 10 per cent or so (of clients) you have lost are those who probably shouldn't have been there . . . who were put into the product by financial planners."
Margin lending has come under fire since the GFC pushed thousands of heavily geared clients into mountains of debt, resulting in increased regulation and scrutiny.
Industry players said the ban on trailing commissions paid to intermediaries around gearing products under the Federal Government's proposed Future of Financial Advice reforms would be "the biggest challenge the industry will face in the next 12 months".
"It is taking away a lot of incentives for advisers to put customers into margin loans," said one senior banker, who did not want to be identified. "A lot of people have been weeded out by the last round of regulations. What it will do, in my view, is stop people reverting to bad behaviour. You will be left with that part of the investor community that understands the product and can use it in a responsible way."
Julie McKay, head of wealth finance at Bendigo and Adelaide Bank subsidiary Leveraged Equities, one of the country's biggest margin lenders, said customer numbers had been stabilising since late last year but average loan balances were slightly off.
"It is not so much that there has been this wholesale exit of clients from the market," Ms McKay said.
"It remains a key part of a lot of people's strategies, they have just readjusted their gearing levels."
She said that since the GFC gearing had dropped back to about 45 to 50 per cent. "That reflects both people being smarter about the way they gear and also a cash neutral strategy given where interest rates and tax deductibility are."
Bell Potter Securities head of wealth management Heather Zampatti said it was "very sound policy" for investors to keep their gearing under 50 per cent.