Wealth planning often requires balancing new opportunities with long-term investment strategies.
As part of Channel Eye’s focus on Financial Services this week, Nedbank Private Wealth looks at how Lombard lending can help clients in international finance centres such as Jersey and the Isle of Man access capital without selling their investments.
Sometimes an investment opportunity comes along that feels too good to miss, but selling long‑term investments to fund it may not be the right move, especially when those assets are already part of a wider wealth plan.
A Lombard loan offers an alternative solution, allowing you to borrow against your investment portfolio, accessing cash when needed and keeping your long‑term plans on track.
For those based in places like the Isle of Man and Jersey, where finances, property and family interests often extend across borders, this type of lending can be a particularly attractive option.
What is a Lombard loan?
A Lombard loan is a loan secured against a diversified investment portfolio, allowing the borrower to access funds while retaining their investments and staying invested in the markets. While the idea dates back many years to the Lombards, a community who conquered Italy in the 6th century and settled in Lombardy, Lombard lending is now a modern financing option often used by high‑net‑worth individuals, families and entrepreneurs who want a quick, flexible and discreet way to raise capital.
How are Lombard loans typically used?
In practice, Lombard loans are used for many different reasons. They can help investors diversify their portfolios, fund business opportunities or provide short‑term cash to manage day‑to‑day needs.
Many clients also use them to support family members – such as helping children buy a first home – or for bridging finance while waiting for a bonus, inheritance or insurance payment. For international clients, including those in the Isle of Man and Jersey, Lombard loans are often used to purchase overseas property, second homes or other assets where traditional mortgages may be slower to arrange, restrictive or not available.
What investments can be used as security?
Lombard loans are usually secured against high‑quality investments that can be easily bought and sold, such as portfolios managed by a bank or wealth manager, or held on an execution‑only basis. In some cases, borrowing may also be possible against a single large holding, such as blue‑chip shares built up through employment, although more volatile investments are generally not accepted.
Investments held in tax‑efficient wrappers like ISAs cannot be used as security, and while self‑invested personal pensions (SIPPs) can borrow under their own rules, they are not used for Lombard lending.
Combining Lombard lending with property finance
Lombard lending can work well alongside conventional property finance and, in some cases, can avoid the need for property valuations, reduce legal costs, and provide quicker access to the funds. This can be useful when paying for renovations that will add value in the future but are not reflected in the existing valuation, bridging a purchase while longer‑term finance is put in place, or buying property in different countries. If the loan relates to a rental property, it may also be possible to claim tax relief on some or all of the interest, depending on personal circumstances and local tax rules.
How much can be borrowed and at what cost?
Loan‑to‑value levels are usually kept cautious, often at around 50% of a diversified portfolio’s value. This helps protect against market ups and downs and reduces the likelihood that extra security will be needed if asset values fall significantly. The cost of borrowing varies depending on factors such as the size and makeup of the portfolio as well as market conditions, but Lombard loans are often competitively priced compared with property‑backed borrowing because the assets used as security are easier to sell.
Understanding the risks
As with any borrowing, Lombard lending comes with risks that should be carefully thought through.
Investment values can go down as well as up, and if the value of the portfolio falls sharply, the lender may ask for part of the loan to be repaid or for extra security to be provided. These risks can be reduced by borrowing less than the maximum available, leaving enough headroom, and keeping other assets in reserve. It is also important to think about the tax position of your investments, including income tax, capital gains tax, and inheritance tax (where relevant to your tax jurisdiction) and to make sure you have enough income to comfortably meet the interest payments over time. We always recommend you seek tax advice from a tax specialist to ensure you align with local tax rules.
Taking a proactive approach
Whether you need to borrow now or are planning for something in the future, speaking to your advisers and private banker early can give you time to explore the options and choose a structure that fits with your wider financial goals.
We offer Lombard loans to our clients across Jersey, the Isle of Man, the UK and the UAE. For those looking for flexible access to capital without disrupting long-term investment plans, Lombard lending can play a valuable role within a well-considered financial strategy.
For more information, please get in touch with our Jersey and Isle of Man private banking teams:
- In Jersey, contact Richard Tribe (main picture)– Senior Private Banker, Jersey – on [email protected] or on +44 (0) 1534 887889
- In the Isle of Man contact Karim Chowdhury – Head of Private Banking, Isle of Man – on [email protected] or on +44(0)1624 645000
Or for more information visit: nedbankprivatewealth.com
Discover more insights from Channel Eye’s Financial Services focus week.
