Sunday, 12 July 2020

Registered Investment Advisors Dramatically Underutilize Collateral Loans, TD Bank Survey Reveals

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CHERRY HILL, N.J: TD Bank, America's Most Convenient Bank, announced today the findings from a recent survey, which revealed that an effective financial product is being often overlooked and underutilized.


The survey, conducted at the 2020 TD Ameritrade LINC Conference, found a discrepancy between understanding the capabilities of collateralized loans to the actual use and offering of those loans to clients. While collateral lending, also known as securities-based lending, benefits both clients and firms, according to the survey findings, it remains an enigma among many registered investments advisors (RIAs).

The TD Bank survey revealed that nearly half (46%) of RIAs agreed that the primary benefit of collateral lending for their respective firms would be the value-added to the client, only 24% of RIAs are ultimately implementing collateral lending as a part of their firms' client offering.

Collateral lending continues to be overlooked as a viable lending solution for many RIA firms and that might be because of a general lack of understanding or lack of information available, said Bryan Loew, Head of Wealth Lending Sales, TD Bank. As a result, collateral lending could be an opportunity for RIAs and their firms to offer this relatively untapped solution that could ultimately help them retain existing clients, while also attracting a new client base.

Additionally, an overwhelming majority of respondents (64%) said that they do not offer collateral lending as part of their practice, with another 10% admitting they were unsure if collateral lending was even offered by its RIA firm. Moreover, 3% of respondents noted that their practice isn't currently leveraging collateral lending but plans to utilize this offering beginning at some point this year.

RIAs Identify Benefits of Collateral Lending

In addition to the value delivered to existing clients by offering a lending solution that can help address liquidity needs, including real estate purchases, business investments, tax planning, estate planning, debt consolidation and large purchases, the survey found that nearly one in four RIAs (22%) said this lending solution helps attract new assets to the firm. Another 19% said it helps its firm retain assets, while 13% indicated that the primary benefit of collateral lending to their firm is customer service.

Furthermore, 34% of respondents indicated that the primary client benefit of collateralized loans was that there is no need to liquidate existing investments, while a quarter (25%) noted the flexible loan or line of credit structure options was the top benefit. Twenty-two percent felt that the top benefit of collateralized lending is the highly competitive interest rates. Additionally, 13% said a primary client benefit is access to cash in as fast as 24 hours, while 7% said streamlined loan underwriting.

The TD Bank survey also revealed that there are multiple factors advisors should consider alongside their clients when applying for collateralized loans, that were split between interest rates (30%), risk tolerance (29%) and underwriting requirements (20%) as the most important factors to consider when applying.

Survey Methodology
The total sample includes 101 survey respondents consisting of registered investment advisors (RIAs) who attended TD Ameritrade's 2020 National LINC Conference. The survey was fielded January 29-30, 2020.

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