Borrowing to invest is for the rich, say advisors

Borrowing to invest is for the rich, say advisors

Borrowing to invest is for the rich, say advisors

Jackson also believes retail clients generally invest in what stocks or securities they think are ‘no brainers’ or ‘absolute wins.’ “A lot of stock can go down 10 to 15 per cent in a blink of an eye,” he says.

Jackson believes only high, net-worth clients should take a chance borrowing to invest, not only because they have the capital to do so, but because they have the sophistication and knowledge of the marketplace. “They get it,” he says.

Swanson, agrees, adding that the majority of investors are in no position financially to do so. “People can borrow enough to get into a mortgage, but the majority of people I work with age-wise, and the majority of younger people, I know, wouldn’t qualify for that kind of thing.”

IIROC’s guidance notice to advisors includes a checklist of issues to consider before making recommendations about borrowing to invest, and outlines the minimum controls dealers should have to identify and supervise strategies which include; the use of margin loans advanced by firms and loans from third parties perhaps affiliated with the dealer.

“IIROC’s guidance when borrowing-to-invest strategies highlights best practices for registered representatives and firms to help them comply with their suitability and supervision obligations,” said IIROC President and CEO Susan Wolburgh Jenah in a release.

 

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