For high-net-worth families, liquidity is often a structuring problem rather than a simple cash problem. Wealth may sit across investment portfolios, property, companies and trusts. Securities-backed lending can convert part of an eligible portfolio into borrowing capacity without an immediate sale, but it should be assessed as secured debt inside the wider wealth plan rather than as a shortcut around tax or succession planning.
At its simplest, securities-backed lending, often described as Lombard lending, uses eligible investments as collateral for a loan or revolving facility. The investments remain exposed to market movements while the debt is outstanding. UBS, for example, describes facilities secured against equities, investment funds, bonds and cash deposits, with the possibility of additional collateral or repayment being required if security values fall. [1]
That combination of liquidity and continuing investment exposure explains why SBL can feature in sophisticated wealth planning. The important question is not whether borrowing keeps a portfolio invested. It is whether retaining that portfolio, while adding debt against it, improves the family's overall position once interest, collateral risk, tax, legal structure and repayment are considered.
What SBL Can and Cannot Do in a Wealth Plan
It can create liquidity without an immediate investment sale. This may help a family avoid selling solely because cash is required at a particular moment. [2]
It does not eliminate tax. HMRC states that selling or otherwise disposing of taxable investments can create a Capital Gains Tax liability. Not selling today may defer a disposal, but a later or forced sale can still have tax consequences. [3]
It does not override trust or estate law. Trust borrowing depends on trustee powers, governing documents, duties and lender requirements. Estate funding also needs to reflect probate and Inheritance Tax rules. [4]
Why SBL Belongs in a Wider Wealth-Planning Discussion
Wealth planning often involves competing objectives. A family may want to retain a long-term investment allocation, purchase property, support the next generation, meet a tax liability or bridge the timing between one capital event and another. Selling assets can solve the liquidity requirement, but it can also alter the investment plan and create a taxable disposal.
SBL adds another option. Weatherbys describes Lombard lending as a way to access liquidity without disrupting an investment strategy and identifies property purchases, tax liabilities and estate and succession planning among potential uses. That does not make borrowing the correct answer in each case. It does mean that liquidity can be considered separately from the decision to sell an investment. [2]
The adviser therefore needs to compare the consequences of selling, borrowing or combining the two. A portfolio with substantial embedded gains may produce one answer; a highly concentrated or volatile portfolio may produce another. The same borrowing level can be prudent for one family and destabilising for another.
Tax: Deferring a Disposal Is Not the Same as Avoiding Tax
The tax argument around portfolio-backed lending is frequently overstated. HMRC's position is straightforward: Capital Gains Tax can arise when shares or other investments are sold or otherwise disposed of and a taxable gain is realised. If no disposal occurs, that particular sale has not happened. [3]
That can make borrowing useful where a client needs temporary liquidity but does not want to sell at that moment. It does not mean the gain has disappeared. A later planned disposal can still create tax, and a forced sale following a collateral shortfall may create a disposal at a time chosen by the lender rather than the investor.
The borrowing itself can also create other tax and structural questions. Interest deductibility, the treatment of family loans or gifts, the ownership of the investments and the residence of the parties all need case-specific advice. Willow's role is to structure and arrange the finance; the tax consequences should be confirmed by the client's tax adviser before the facility is relied upon as part of a planning strategy.
The Better Tax Question
Do not ask whether SBL is "tax efficient" in the abstract. Ask what tax event would arise if assets were sold now, what happens if they are sold later, what the borrowing costs during that period, and whether the client can tolerate a forced sale if markets fall.
Trusts: Borrowing Powers Come Before Liquidity
Trust-held investments can, in some circumstances, support portfolio-backed borrowing. Weatherbys states that its Lombard facilities may be available to trusts, while Rathbones' client lending material also describes lending to trusts. These are examples of lender appetite, not evidence that every trust can or should borrow. [2] [6]
The first question is legal authority. Trustees need to establish that the trust deed and applicable law permit borrowing and the granting of security. They also need to consider their duties to beneficiaries and whether using the portfolio as collateral is appropriate for the trust's objectives. A lender may require legal opinions, trustee resolutions or other evidence before accepting the structure.
The second question is economic. Pledging trust assets introduces lender rights into a structure designed to serve beneficiaries over time. A facility that is manageable at inception can become problematic if markets fall, distributions are required or the trust has limited cash outside the pledged portfolio.
Estate Liquidity and the Timing Problem
Estate administration can create a genuine liquidity mismatch. HMRC states that Inheritance Tax is generally due by the end of the sixth month after death and that payment normally needs to begin before a grant of representation can be obtained. This can matter where an estate is asset-rich but lacks immediately accessible cash. [4] [5]
Portfolio-backed borrowing may be one route to examine where an eligible portfolio exists and the appropriate person or entity is able to borrow against it. The structure must be confirmed carefully: executors, trustees, beneficiaries and family members do not automatically have interchangeable rights over estate assets.
In some cases the more suitable answer may be payment from estate accounts, a specialist probate facility, property-backed borrowing or another source of family liquidity. The purpose of including SBL in the discussion is not to force it into the estate plan, but to prevent an unnecessary investment sale if a better-supported source of short-term capital is available.
Intergenerational Support Without Automatically Selling the Family Portfolio
Families often want to provide capital to children or grandchildren for property, education, business investment or other significant needs. Where the family's wealth is substantially invested, SBL can create liquidity without immediately breaking up a long-term portfolio.
The financing decision still needs to be separated from the transfer decision. The family must decide whether funds are being gifted, loaned or provided through a trust or another structure. Those choices can create their own tax, legal and governance consequences. A lender's willingness to release cash against a portfolio does not determine how the family should pass that cash to the next generation.
This distinction is particularly important for family offices. The borrowing can sit at one level of the family structure while the property or other asset is acquired at another. Documentation, currency, servicing and repayment should be mapped before money moves between entities or family members.
Investment Continuity Is a Benefit, but It Is Also the Risk
One of the strongest reasons for using SBL is also the source of its principal risk: the portfolio remains invested. If markets rise, the borrower retains that exposure. If markets fall, the value supporting the loan can fall with them.
UBS states that a lender may require additional collateral or partial or full repayment where security values fall below required levels, and that investments may be liquidated if the borrower does not meet that obligation. Weatherbys similarly explains that margin calls can require extra funds or a reduction in borrowing. [1] [2]
That means "keeping the portfolio intact" should never be presented as a guaranteed outcome. The portfolio remains intact only while the facility's collateral requirements are met. Conservative initial borrowing, diversification and accessible reserves can reduce risk, but they do not remove it.
Cross-Border Wealth Adds Currency, Custody and Jurisdiction Risk
International families frequently hold investments, property and borrowing in different countries and currencies. SBL can be useful precisely because the collateral need not always sit in the same jurisdiction as the property or expenditure being funded. That flexibility also creates additional questions.
The lender needs to accept the client's residence, ownership structure, custodian and securities. Legal enforceability over the portfolio must be established. If the portfolio is denominated mainly in dollars or euros but the borrowing is in sterling, movements in exchange rates can affect both the client's overall balance sheet and the value of collateral relative to the debt. UBS expressly highlights currency and interest-rate changes among the risks that can affect investment values and expected returns. [1]
Custody is equally important. Some lenders will consider portfolios held elsewhere; others require assets to move or be subject to control arrangements. The operational consequences should be understood with the existing wealth manager before lender selection.
Illustrative Family-Office Example
Consider a hypothetical family office with a £50m diversified global investment portfolio. The family wants to make £8m available to support two adult children acquiring UK property, while retaining the core investment strategy. Assume an appropriate lender is willing to establish a £10m securities-backed facility, of which £8m is initially drawn.
| Illustrative element | Planning question |
|---|---|
| £50m investment portfolio | Which holdings are eligible, how concentrated are they and where are they custodied? |
| £10m approved facility | What are the advance rates, maintenance levels, interest terms and lender rights? |
| £8m initial draw | How much collateral headroom remains after the funds are released? |
| Family support | Are the onward funds gifts, loans or trust distributions, and what advice is required? |
| Repayment | Will repayment come from mortgages, asset sales, business liquidity or another defined source? |
The example deliberately separates the financing from the wealth-transfer structure. The lender may be comfortable with the family office's portfolio, while the tax adviser or solicitor recommends a particular route for making funds available to the children. Those are connected decisions, but they are not the same decision.
It is also important to stress-test the arrangement. If the portfolio falls materially, the facility may consume far more of the available collateral than intended. A borrowing level that looks modest against a £50m portfolio today should still be tested against a lower portfolio value, higher interest costs and a delay to the planned repayment route.
When Securities-Backed Lending May Be the Wrong Tool
SBL should not be used simply because a portfolio exists. It may be unsuitable where the investments are highly concentrated, illiquid or already supporting other obligations; where the client has no accessible reserve; or where repayment depends on indefinite market appreciation.
It can also be the wrong answer where the trust or corporate structure cannot grant the required security, where moving custody would disrupt the investment strategy, or where a conventional mortgage or property-backed facility offers a more stable long-term structure.
The most useful wealth-planning process therefore compares SBL with selling part of the portfolio, mortgage finance, property-backed borrowing and other liquidity sources. The objective is not to preserve every investment at any cost. It is to choose the funding structure that creates the best balance between liquidity, flexibility, risk and long-term wealth objectives.
How Willow Private Finance Can Help
Willow Private Finance can assess securities-backed lending as part of a wider funding requirement rather than as a standalone product. We map the portfolio, ownership, custody, currencies, existing debt, required liquidity and expected repayment route before identifying the lender models that may fit.
For family offices, trustees and high-net-worth clients, we can work alongside investment managers, tax advisers, accountants and solicitors so that the borrowing structure is considered within the wider plan. Willow arranges the finance; investment, tax and legal advice remains with the relevant professional adviser.
This is particularly important where several financing routes are available. The correct answer may be a smaller SBL facility alongside a mortgage, a temporary portfolio-backed line followed by refinancing, or no SBL at all. The aim is to use the whole market to solve the liquidity requirement without forcing the client into a single product.
Using an Investment Portfolio as Part of a Wider Wealth Plan?
If liquidity is needed for property, family support, tax timing or another substantial requirement, the first step is to establish what the portfolio can genuinely support and how the borrowing behaves if markets fall.
Willow can assess securities-backed lending alongside mortgage and other financing options, while coordinating with the client's existing investment, tax and legal advisers.
Explore Securities-Backed Lending →Frequently Asked Questions
Key questions for high-net-worth families, trustees and advisers considering portfolio-backed liquidity as part of a wider wealth plan.
Does securities-backed lending avoid Capital Gains Tax?
Borrowing against investments does not itself require a disposal of those investments, so it may avoid an immediate sale that could otherwise crystallise a gain. That is not the same as eliminating tax. A later sale, a forced sale after a collateral shortfall, or other transactions may still create tax consequences, and the outcome depends on the owner, assets and jurisdiction.
Can a trust use securities-backed lending?
Potentially, but only where the trust structure, governing documents, trustee powers and lender requirements permit it. Trustees also need to consider their duties, the interests of beneficiaries, the suitability of pledging trust assets and the legal and tax consequences. Trust-held investments should never be assumed to be freely available as collateral.
Can securities-backed lending help with estate or inheritance-tax liquidity?
It can be one financing option to examine where an appropriate borrower owns an eligible investment portfolio. HMRC normally requires Inheritance Tax to begin being paid before probate is granted, so liquidity timing can matter. Whether portfolio-backed borrowing is legally and practically available in an estate context requires case-specific legal, tax and lender advice.
How can SBL support intergenerational wealth planning?
A family may use portfolio-backed liquidity to fund property, education, business or other family objectives without immediately selling long-term investments. The funding route still needs to be structured carefully because gifts, family loans, trusts and cross-border transfers can have separate legal and tax consequences.
What is the main risk when SBL is used inside a wealth plan?
The pledged investments can fall in value while the debt remains outstanding. The lender may then require more collateral or repayment and may be able to sell investments if the shortfall is not corrected. Conservative leverage, diversification, accessible reserves and a repayment plan that does not depend solely on market performance are therefore important.