UK wealth managers and independent financial advisors (IFAs) are witnessing a surge in client interest in leveraged exposure, according to new research from GraniteShares, a global issuer of exchange traded products (ETPs).
The study has revealed that 85% of UK-based wealth managers and IFAs report that their clients have invested in financial instruments that offer leveraged exposure. Clients appear to favour certificates for leveraging long or short positions, with 66% of wealth managers and IFAs citing them as the preferred instrument.
ETPs and ETFs are the second most popular choice, used by 31% of clients, while 3% opt for contracts for difference. About 9% of advisors said their clients had not previously invested in leveraged products but were now considering them.
94% of wealth managers and IFAs have seen an increase in clients interested in shorting stocks, according to the findings. Among those clients, 46% are aiming to profit from tactical investing, while 14% are using short positions to hedge against other investments. Another 40% of clients are using short strategies for both profit-making and hedging purposes.
The rise of tech wealth management is “forcing IFAs to retire”
Despite this interest, the research also highlighted a gap in client awareness of available leveraged products. Over half of wealth managers and IFAs said that more than half of their clients are aware of the ability to take leveraged positions on single stocks via liquid ETPs listed on major exchanges. However, 24% said less than half of their clients are aware, and 15% believe only a few clients understand these products. Only 7% of advisors report that most of their clients are familiar with single-stock ETPs.
With a growing number of ETPs offering leveraged exposure on individual stocks like Barclays, BP, Shell and Amazon, wealth managers are preparing for further growth.
83% of wealth managers and IFAs expect client use of leveraged single-stock ETPs to increase over the next two years, with 4% predicting a dramatic rise. About 17% anticipate that client interest will remain stable.
Will Rhind, founder and CEO of GraniteShares, said: “Investors are increasingly looking to other means of boosting returns on investments and leverage is rapidly moving up the agenda for clients of IFAs and wealth managers. That is underlined by the growing awareness of products such as our leveraged ETPs, the most
efficient wrappers to take leveraged exposures in an easy way, and the growing demand we are seeing from sophisticated investors.”
