As a Registered Investment Advisor (RIA), your primary job is to act in your client’s best interest. You help them build portfolios, plan for goals, and navigate market volatility.
But there is a situation where even the best portfolio planning falls short: when a client needs cash urgently.
Medical emergencies, business opportunities, education payments, or property purchases — life does not wait for the right market conditions. When these situations arise, clients often do the one thing you advise against: they redeem their investments at the wrong time.
Loan against securities (LAS) gives you a tool to prevent this. Here is why it deserves a place in every RIA’s advisory toolkit.
The Problem You Are Already Facing
Think about the last time a client called you saying they need money urgently. What were the options?
- Redeem investments — This is what most clients default to. But it means selling at whatever the market price is, paying capital gains tax, losing compounding, and potentially derailing a long-term goal
- Take a personal loan — High interest rates (14-24%), processing fees, and it adds unsecured debt to the client’s profile
- Use credit cards — The most expensive option at 24-42% annualised interest
- Borrow from family/friends — Uncomfortable and not always possible
None of these are ideal. LAS offers a fifth option that is better in most scenarios.
How LAS Fits Into Your Advisory Practice
1. Protect the Financial Plan
Every financial plan you create assumes that investments will remain untouched until the goal date. When a client redeems ₹10 lakh from their child’s education fund 5 years early, it does not just reduce the corpus by ₹10 lakh — it reduces it by the ₹10 lakh plus all the compounding that money would have earned over those 5 years.
LAS lets you keep the plan intact. The client borrows against the portfolio, meets their need, and repays over the next few months. The investments stay on track.
2. Tax-Efficient Liquidity
When you recommend a redemption, you also need to consider the tax implications:
- Short-term capital gains at 20% on equity
- Long-term capital gains at 12.5% above ₹1.25 lakh on equity
- Gains taxed at slab rates for debt funds
A loan against securities does not trigger any capital gains tax. For clients with large portfolios and significant unrealised gains, this can save them lakhs in taxes.
As an RIA, recommending a tax-efficient approach reinforces your value as an advisor who thinks holistically, not just about investments.
3. Manage Behavioural Risks
One of the biggest challenges in advisory is client behaviour during volatility. When markets crash, clients panic. They want to sell everything and move to cash.
If a client’s reason for wanting to exit is partly emotional and partly driven by a genuine cash need, LAS gives you a middle ground. You can say: “Let us not sell anything. Let us borrow against a portion of your portfolio to cover your immediate need, and let the market recover.”
This keeps the client invested, prevents permanent capital loss from panic selling, and preserves the advisory relationship. When markets recover (as they historically do), the client sees the wisdom of your advice.
4. Differentiate Your Practice
Most RIAs focus on portfolio construction and financial planning. Few actively offer liquidity solutions. By including LAS in your services, you offer something most competitors do not.
This is especially important for HNI and affluent clients, who:
- Have larger portfolios with more collateral value
- Face bigger tax consequences from redemptions
- Value comprehensive financial solutions
- Expect their advisor to handle complexity, not just pick funds
5. Generate Client Loyalty
Helping a client during a financial crisis — without disrupting their long-term plan — creates deep loyalty. This is the kind of advice that clients remember and talk about.
Compare two scenarios:
Advisor A: “You need ₹15 lakh? Let me redeem some funds for you.” Advisor B: “You need ₹15 lakh? Let us not sell anything. I can help you get a loan against your portfolio at 10% interest. Your investments stay intact, no tax hit, and you repay when you are ready.”
Which advisor would you stay with?
Practical Implementation for RIAs
Understanding the Product
Before recommending LAS to clients, make sure you understand:
- Eligible securities — Which mutual funds, shares, and bonds can be pledged
- LTV ratios — How much can be borrowed against different asset types
- Interest rates — Current rates and how they compare to alternatives
- Margin call mechanics — What triggers a margin call and how to manage it
- Tax implications — No capital gains on borrowing, interest deductibility for business use
Identifying the Right Clients
LAS is most useful for clients who:
- Have a portfolio of ₹5 lakh or more in eligible securities
- Face occasional liquidity needs (not chronic cash shortages)
- Would otherwise redeem investments at an inopportune time
- Are in high tax brackets (making tax-free borrowing more valuable)
- Are business owners who need working capital
Proactive Conversations
Do not wait for the emergency call. Mention LAS during your regular portfolio reviews:
“By the way, if you ever face a situation where you need cash urgently — for any reason — please call me before redeeming anything. There are options like loan against securities that can give you the money without selling your investments. I just want you to know this option exists.”
This one sentence can prevent impulsive redemptions and position you as a thoughtful advisor.
Partnering with a Lending Platform
As an RIA, you can partner with platforms that offer LAS. This allows you to:
- Help clients through the application process
- Monitor their pledged portfolios
- Alert them to margin call risks before they become critical
- Coordinate repayment and lien release
Since you are a fee-only RIA, you do not earn commissions on the loan itself — but the value you provide strengthens the advisory relationship and justifies your fee.
Addressing Client Concerns
“Is it safe to pledge my investments?”
Yes. The investments remain in the client’s ownership. A lien is simply a restriction on selling. Returns continue to accrue normally.
“What if the market crashes after I take the loan?”
This is a valid concern. If the collateral value drops, there may be a margin call. As the advisor, you can:
- Recommend conservative LTV (borrow 30-40% when 50-60% is available)
- Suggest pledging debt funds or diversified equity funds (less volatile than individual stocks)
- Keep some unencumbered securities available as backup collateral
“Isn’t it better to just redeem?”
Only if the amount is small, the gains are minimal, and the fund has no exit load. For any significant amount, the tax savings and continued compounding from LAS almost always make it the better choice.
Key Takeaways
- LAS helps RIAs protect client financial plans by providing liquidity without redemptions
- It avoids capital gains tax, preserves compounding, and keeps the portfolio intact
- Offering LAS differentiates your practice and deepens client loyalty
- It is most valuable for HNI clients, business owners, and clients in high tax brackets
- Proactively mentioning LAS during reviews prevents impulsive redemption calls
- Always recommend conservative LTV and help clients understand margin call risks
Adding loan against securities to your advisory toolkit is not about selling a loan product — it is about providing a complete financial solution that protects your clients’ wealth in every situation, not just when markets are going up.
