Leverage Suitability Checklist

The following Leverage Suitability Checklist is a 5-minute tool that provides proof that the client has understood the key guidelines outlined by regulators.

Goal Identification

  • Retirement income
  • Estate
  • Lump-sum for purchase
  • Restructure non-deductible debt
  • Diversify by strategy
  • Other ___________________________

Financial Qualifications

  • Loan to net worth ratio is less than 50%
  • Total Debt Service Ration is less than 35%

Reducing Margin Call Risk

  • Using a loan or (home equity) line of credit where investments are not used as collateral, and a margin call is not possible
  • Using a loan program where there is no margin call
  • The investor has, and will maintain, sufficient "margin call buffer" in the form of other liquid investments to cover a margin call even if the leveraged investments drop by 40%

Initial Each to Acknowledge ...

    ______ I understand that funds fluctuate in value and future returns are not guaranteed

    ______ I understand leveraging magnifies gains and losses

    ______ I plan to invest for a minimum of 8 years

    ______ I have received an educational book/booklet on leveraging, outlining the risks

    ______ I have received a personalized projection of net benefits (or loss) from leveraging over a range of returns, including 0%

    ______ I understand the tax deductibility of interest is not guaranteed

    ______ I understand that interest rates and loan payments can fluctuate

    ______ I feel that this use of leverage is both appropriate and responsible for my situation

    ______ I have signed the Leverage Disclosure Form and Emotional Acid Test