Home' Trinidad and Tobago Guardian : September 14th 2014 Contents SEPTEMBER 14 • 2014 www.guardian.co.tt SUNDAY BUSINESS GUARDIAN
PERSONAL FINANCE | SBG15
How you borrow is an impor-
tant aspect of maintaining
your wealth and achieving
your overall financial objec-
tives. When executed prop-
erly, a securities based loan
can provide the financing you need without
liquidating assets, diminishing cash reserves
or disrupting your overall investment strategy.
There are risks associated with using your
assets as collateral in a securities based loan,
including for example (i) the need to deposit
additional eligible securities to maintain the
availability of funds and (ii) possible margin
calls on short notice.
As you pursue your passions---such as delv-
ing into a business opportunity or purchasing
a vacation home---you are faced with multiple
financing options. How you choose to borrow
is important to meet your immediate need for
liquidity as well as maintain your long-term
wealth management strategy.
Liquidating an eligible investment account
can be part of that plan, but there are potential
hidden costs in doing so such as taxes on
capital gains. Two other considerations include
the potential loss of future asset growth, also
known as opportunity cost, and the possibility
of creating an imbalance in your portfolio s
overall asset allocation.
When the time comes---or when an oppor-
tunity arises---an alternate financing strategy
may offer a more practical approach: securities
For those of you who are not familiar with
securities based lending, it is a form of lending
that enables you to use the eligible securities
in your brokerage account as collateral for a
loan or a line of credit. As long as eligible col-
lateral remains and an adequate value of such
collateral is maintained, a securities based loan
can create the liquidity you need to take advan-
tage of a present opportunity or meet an
immediate need without liquidating assets,
diminishing cash reserves or disrupting your
overall investment strategy.
By establishing a securities based loan, you
can gain quick and efficient access to funds
that may enable you to achieve a number of
• Explore small-business opportunities.
• Purchase luxury items.
• Finance real estate.
• Pay taxes
• Fund higher education.
• Finance a bridge loan.
• Meet general liquidity needs.
A securities based loan offers many benefits
that may not be available through traditional
loans. The process is relatively simple, in part,
because the collateral is liquid and readily
accessed via your investment account. Once
approved, you can make withdrawals by simply
writing a check or wiring funds when needed.
With no origination, maintenance or facility
fees, securities based loans may be a cost-
Because your investments are not liquidated,
as long as the required level of collateral is
maintained, securities based lending preserves
the potential for growth of your investments
and can reduce the chance of having an imbal-
ance in asset allocation.
In this way, securities based lending can
align with your overall wealth management
objectives by enabling you to unlock the value
of your portfolio to meet short-term financing
needs, while keeping your longer-term wealth
management strategy intact.
Please contact us to learn more about secu-
rities based loans in addition to other lending
solutions that may be available to meet your
1. Borrowing against securities may not be
suitable for everyone. Please be aware that
securities based loans involve a high degree
of risk and that market conditions can magnify
any potential for loss. Most importantly, please
(1) Sufficient collateral must be maintained
to support your loan(s) and to take future
(2) You may have to deposit additional cash
or eligible securities on short notice;
(3) Some or all of your securities may be
sold without prior notice in order to maintain
account equity at required maintenance levels.
You will not be entitled to choose the securities
that will be sold. These actions may interrupt
your long-term investment strategy and may
result in adverse tax consequences or in addi-
tional fees being assessed;
(4) Morgan Stanley Bank, NA, Morgan Stan-
ley Private Bank, National Association or Mor-
gan Stanley Smith Barney LLC (collectively
referred to as "Morgan Stanley") reserves the
right not to fund any advance request due to
insufficient collateral or for any other reason
except for any portion of a securities based
loan that is identified as a committed facility;
(5) Morgan Stanley reserves the right to
increase your collateral maintenance require-
ments at any time without notice; and
(6) Morgan Stanley reserves the right to call
securities based loans at any time and for any
The proceeds from certain securities based
loan products may not be used to purchase,
trade, or carry margin stock (or securities,
with respect to Express CreditLine); repay
margin debt that was used to purchase, trade
or carry margin stock (or securities, with
respect to Express CreditLine); and cannot be
deposited into a Morgan Stanley Smith Barney
LLC or other brokerage account.
2. Morgan Stanley Smith Barney LLC ("Mor-
gan Stanley"), its affiliates, employees and
Morgan Stanley Financial Advisers are not in
the business of providing tax or legal advice,
and these materials and any statements con-
tained herein should not be construed as tax
or legal advice. This material was not intended
or written to be used, and it cannot be used
by any taxpayer, for the purpose of avoiding
penalties that may be imposed on the taxpayer
under US federal tax laws. Individuals should
consult their personal tax adviser or attorney
for matters involving taxation and tax planning
and their attorney for matters involving per-
sonal trusts and estate planning.
3. No application or origination fee charged
by Morgan Stanley. In certain instances, bor-
rowers will be required to pay legal or doc-
umentation fees to third parties. Clients may
be charged a fee for the issuance of a letter
of credit in connection with certain securities
based loan products.
4 Asset allocation does not assure a profit
or protect against loss in declining financial
The contents of this document should not be con-
strued as a commitment to lend.
Morgan Stanley is a registered broker/dealer, a
member SIPC, and not a bank. Where appropriate,
Morgan Stanley has entered into arrangements with
banks and other third parties to assist in offering
certain banking related products and services. Unless
specifically disclosed in writing, investments and serv-
ices offered through Morgan Stanley are not insured
by the FDIC, are not deposits or other obligations
of, or guaranteed by, a bank and involve investment
risks, including possible loss of principal amount
Trinidad Guardian engaged Morgan Stanley to fea-
ture this article.
© 2014 Morgan Stanley Smith Barney LLC.
Article Written By: Wealth Management Systems,
Inc.Courtesy of: David Fox, Senior Vice President
Branch Name: Morgan Stanley (Boca Raton West)
CRC 882987 5/2014
Unlock the value of your portfolio
...with securities-based lending
DAVID H FOX
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