August 24, 2021—The combination of a rising stock market and low interest rates creates a unique opportunity to use leverage as part of your overall wealth plan. The rationale is you can borrow against your investments at a low rate and still have the opportunity to benefit from potential stock market appreciation. In today’s podcast, Wilmington Trust Regional Managing Director and Senior Private Banker Rhonda Pirvulescu explores the possible benefits of establishing a securities-based line of credit to fund certain expenses without disrupting your investment plan.
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The information provided herein is for informational purposes only and is not intended as a recommendation or determination that any tax, estate planning, or investment strategy is suitable for a specific investor. Note that tax, estate planning, investing, and financial strategies require consideration for suitability of the individual, business, or investor, and there is no assurance that any strategy will be successful.
Wilmington Trust is not authorized to and does not provide legal or accounting advice. Wilmington Trust does not provide tax advice, except where we have agreed to provide tax preparation services to you. Our advice and recommendations provided to you are illustrative only and subject to the opinions and advice of your own attorney, tax advisor, or other professional advisor.
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Borrowing with securities as collateral involves certain risks and is not suitable for everyone. A complete assessment of your individual circumstances is needed when considering a securities-based loan. You should review both the Securities-Based Lending Program Credit, Security and Guaranty Agreement and the Disclosure, Waiver of Conflict of Interest, Acknowledgment and Release carefully with your legal and tax advisors. Also consider the following:
- Credit secured by marketable securities can increase your level of market risk.
- The downside is not limited to the collateral value in your pledged account.
- Assets held in your accounts may lose market value or may be afforded less collateral value by the lender at any time, resulting in a collateral call.
- The collateral maintenance requirements can be increased at any time, which may result in a collateral call, and the lender is not required to provide you with advance written notice.
- You are not entitled to an extension of time on a collateral call.
- An increase to the variable interest rate will result in a higher periodic payment required and, if you are unable to make the higher periodic payment, could result in a collateral call.
- The sale of any securities in your account may be initiated, without contacting you, to meet a collateral call. • Your ability to withdraw assets will be subject to the consent of the lender.
- The sale of your pledged securities may cause you to suffer adverse tax consequences. You should discuss the tax implications of pledging securities as collateral with your tax advisor. Neither M&T Bank Corporation, nor any of its subsidiaries, affiliates, or advisors, provide legal, tax or accounting advice. You should consult a legal and/or tax advisor before making any financial decisions. All securities and accounts are subject to eligibility requirements. Certain restrictions and terms and conditions apply. Tax deferred assets are not eligible. Financing real estate with a securities-based loan or line of credit carries risk and may not be appropriate for your needs. Securities held in a retirement account cannot be used as collateral to obtain a loan.