When a client needed a multi-million dollar line of credit, Advisor Margaret Black-Scott found a bank to provide the loan.

“We have those relationships,” says Ms. Black-Scott, managing director of Beverly Hills Wealth Management, which manages about $500 million in assets. “We will hammer to offer you the best [interest] rate as we can.”

Bari Bonman


Whether large or small, more and more financial advisors today find themselves helping their clients obtain loans in-house or through an outside bank.

For brokers who have access to their employer’s bank and, in many cases, are compensated for making loans, this is an easy endeavor. For independent advisers acting as loan brokers to find the right bank with the lowest rate – mostly without compensation – some extra work is required.

Nevertheless, the reward is simple to understand: a closer relationship with the client who, consequently, can stay with his adviser for life and perhaps attract new clients. Plus, in a time when advisors are taking on a bigger role in managing their clients’ finances, loans can foster a deeper conversation about money and investing.

“It’s a natural evolution” of the relationship between advisors and their clients, which has long evolved from simply buying stocks and bonds, says Tash Elwyn, president of Raymond James & Associates Private Client Group.

The increase in demand for loan counselors stems in part from the financial crisis. Commercial banks tightened their lending criteria, so customers were forced to go through other sources to find loans.

Most clients now have bigger wallets thanks to a healthy stock market and therefore much more collateral to offer to obtain internal loans, sometimes obtaining personal loans instead of mortgages to bridge the purchase of a home.

In fact, the big brokerages are giving out a lot more loans these days.

Bank of America Corp.

says loans made by its Merrill Lynch advisors grew nearly 19% in 2013.

Morgan Stanley

(MS) and

Raymond James Financial Inc.

also say loans grew by double digits last year and the two companies expect demand for loans to continue at a healthy pace this year.

By contrast, many independent advisers have only just begun to facilitate loans for their clients, says Francisco Turner, chief executive of

California bench Inc.,

which is carving out a niche as the go-to place for advisors as a source of lending.

“Many advisors we talk to don’t know they have access” to loans, he says.

Irvine, Calif., Regional Bank has a business unit that makes loans through advisors and has so far worked with 4,000 advisors. Mr. Turner expects to have relationships with 12,000 advisers by the end of the year.

Independent advisers generally do not have formal links with banks. Instead, they shop around for the best rate and loan terms. Even advisers who partner with Banc of California don’t have to use the bank for all their loans, Turner says.

In many ways, Independent Advisors operate like a mortgage broker, checking rates and terms and researching the best type of mortgage for a client.

“We search and find the best deal,” says Gene Diederich, chief executive of Moneta Group LLC, which manages $16 billion in assets. He says he has helped many clients refinance their mortgage. “Being independent gives us the advantage of not being tied to any particular banking institution.”

Pricing and terms are important, but so is service, Diederich says: “We also like banks that make the process easier for our customers.”

Ms. Black-Scott of Beverly Hills Wealth Management says she begins her research by outlining a client’s borrowing needs to a bank to gauge interest before even looking at rates and terms. Then it asks the customer to accept the chosen bank.

“We try to do a ‘prematch'” between the bank and the client before the start of loan negotiations, she says.

Margin lending has always been part of brokerage relationships. But mortgages, no-profit loans and investment-backed lines of credit have become increasingly common lending products. Non-profit loans and lines of credit generally have lower rates than margin loans.

These margin-free loans can be made within days and banks accept a wide range of investments as collateral, such as unlisted securities, hedge fund investments and even currencies, Banc’s Mr. Turner said. of California.

However, there are risks for both brokers and independent advisors, mainly when underwriting becomes risky and clients are unhappy.

If the securities given as collateral lose value, banks can reduce the loan amount and require more securities as collateral, or banks can reduce lines of credit that a customer has in place for a bad day but he doesn’t use regularly. All of this can give the adviser a bad image.

Of course, transmission companies compensate their advisors for cross-selling banking products, including loans. Morgan Stanley, the nation’s largest brokerage by number of advisers, this year changed its incentive for advisers to get their clients to borrow more.

Some independent firms charge hourly fees for wealth planning. Thus, loan assistance will yield more billed hours. Some banks, such as Banc of California, pay advisors a commission based on the repayment of the borrower’s loan.

Even though many independent advisors do not derive any direct financial benefit from helping them obtain loans, they say their efforts are worth it.

“You’re responding to something your client needs and wants,” says Black-Scott, who receives no compensation for her help with the loans. “That can be a big plus: you’ve gone out of your way to do a good job for your client.”

Write to Matthias Rieker at [email protected]

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