Broadridge launches SBL product in ‘meme stock’ era

Rick Steves

SBL credit has experienced growing demand as borrowers look to access liquidity in their portfolios and lenders encounter a low-cost, low-risk credit offering.

Broadridge Financial Solutions has launched a Wealth Lending Network marketplace so that wealth managers can offer Securities-Based Lending (SBL) services to their clients. Bancorp has taken the lead as it joined the marketplace as its inaugural funding partner.

Mike Alexander, President of Wealth Management, Broadridge, said: “The Wealth Lending Network is an exciting evolution of the market’s dynamic – connecting the supply-and-demand sides on a trusted lending platform that creates value for lenders, advisors, and their clients. We are focused on building value-added services in a way that makes business substantially easier and more robust for our clients – whatever their size. The marketplace opens up the SBL market to drive growth for clients by facilitating market access, funding, technology, credit risk management, and sales enablement.”

Jeff Hazelwood, Managing Director of Institutional Banking Solutions, The Bancorp, commented: “The Bancorp is excited to join Broadridge’s Wealth Lending Network as its initial funding partner, tapping into this new channel built on Broadridge’s market access and proven end-to-end SBL technology. Our participation in Broadridge’s Wealth Lending Network builds on The Bancorp’s ongoing strategic investment in our SBL market leadership.”

SBL credit has experienced growing demand as borrowers look to access liquidity in their portfolios and lenders encounter a low-cost, low-risk credit offering. The Broadridge Wealth Lending Network enables independent broker-dealers, financial advisors, and RIAs, to offer SBL to clients on a turnkey basis.

“By providing flexible credit offerings, advisors can deepen relationships with clients, safeguarding existing AUM, and attracting new assets. What had traditionally been a slow and manual process is now digitized, delivering a streamlined and frictionless customer experience”, Broadridge’s Mike Alexander added.

A few years back, FinanceFeeds covered Interactive Brokers’ asset-based lending solution so that clients could put stock market collateral to work, with industry-low margin loan rates from its omnibus accounts. Clients with Portfolio Margin and Reg-T Accounts can easily calculate and access line of credit to make purchases at lower interest rates.

The securities-based lending allows retail traders to stay invested long-term and not having to deal with the dilemma of whether to sell stock to pay for an expense or take out an expensive loan. It’s the product that allows clients to have their cake and eat it.

Democratization of trading‘ has become the new buzzword ever since the r/WallStreetBets subreddit took the world by storm with the Gamestop short squeeze.

A recent report conducted by FINRA and NORC found that retail investors in 2020 were driven by the market dips caused by pandemic fears and the ability to invest with small amounts. We may be witnessing a shift towards more equitable investment participation.

The most frequently cited reason for both experienced and new investors was retirement investments, according to the study. “The spike in new investors demonstrates that people, given access and opportunity, will take steps to participate in the equity markets, potentially benefiting from the historically higher long-term returns these markets offer,” said FINRA Foundation President Gerri Walsh.

“On the one hand, this research offers the investment industry, investor advocates, and policymakers critical insights about pathways to financial inclusion for all Americans and presents a roadmap to help inexperienced investors, women, and people of color close the wealth gap. On the other, low levels of investment knowledge among all types of investors in the sample—new and experienced—underscore the importance of educating investors about risk and reward, costs and fees, tax consequences of investing and other key concepts”, Ms. Walsh added.

The unprecedented activity in retail trading, with a higher number of new and smaller trading accounts, will potentially increase the typical dilemma of whether to keep the investment portfolio untouched or withdraw part of it in order to pay for an expense. Broadridge’s new SBL product will be able to address the issue and provide a third option.

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