Stuart Jarvis has spent years working with some of the world’s leading private banks and custodians to bring securities lending to their clients. These are the questions those clients ask most often – and what the banks that have navigated them successfully have learned.

Securities lending now features in most private banking portfolio reviews. Whether the client arrives curious or sceptical, the conversation that follows is remarkably consistent. So is the moment when reservations give way to something else entirely.

“Is this too good to be true?”

What feels like an implausible proposition is, in practice, one of the most established income-generating strategies in institutional finance. Securities lending is not a new product. It is a decades-old market, built deliberately by the world’s largest financial institutions – BlackRock, Vanguard and State Street among them – to generate additional revenue from existing holdings with carefully managed risk. Managing trillions of client assets, they could not afford to do otherwise.

Most individuals with a pension have likely been on the earning side of securities lending for years, without knowing it. The question worth asking is not whether it is too good to be true. It is why it has taken this long to reach them directly.

“I’m protecting wealth at this point, not chasing yield.”

Many private banking clients are at the stage where they are no longer building wealth, but protecting it. The last thing they want is new complexity to manage. What they discover is that securities lending adds income without adding extra effort. No selling, no new positions, no management required on their part. Portfolios remain exactly the same, with one addition: additional income on assets that were going to sit there either way.

“Who is actually borrowing the securities?”

In most private bank programmes, the answer is the bank itself. The bank borrows the client’s securities directly, then lends them on to the broader market. This means the client is not taking on a new counterparty relationship. They are simply extending an existing one, with an institution they have already chosen to trust with their wealth.

“What’s the actual risk?”

The main risk is that the bank fails to return the shares. In practice, this is uncommon, and the safeguards are designed with exactly that scenario in mind. Loans are backed by collateral that exceeds the value of the securities lent, adjusted every day. In the event of a default, that collateral is used to compensate the client.

Two further considerations tend to come up. While shares are on loan, the client temporarily loses the ability to vote on those positions, though the shares can be recalled ahead of any vote the client wishes to participate in. The client continues to receive the economic equivalent of all dividends and distributions, though these are received as manufactured payments and may be treated differently for tax purposes. Advisers are best placed to walk clients through the implications for their specific situation.

Walking clients through these points is, in itself, part of the fiduciary role. But so is ensuring clients are aware of every opportunity to grow their wealth. An adviser who does both is doing precisely what that duty requires. Not mentioning it at all is harder to justify.

“What if I want to sell?”

For clients who have held the same positions for years, the idea of lending them, even temporarily, raises a straightforward concern: what if circumstances change and they want to sell?

The answer is straightforward. Private bank programmes are designed to ensure clients retain full control and economic ownership, and can continue to buy and sell shares unhindered. The question was never really about selling. It was about the perceived loss of control, and whether agreeing to lend meant giving any of it up. It does not.

“What happens to my income when markets fall?”

For long-term holders, this is often the question that reframes everything. When markets fall, the instinct is to look for something to do. But for clients who believe in their positions and have no intention of selling, there is nothing to do but wait.

What securities lending can add to that wait is a potential income stream that is independent of market direction – one that can generate returns whether markets are rising or falling. In volatile conditions, demand to borrow certain securities tends to rise, which means lending income can increase at the same moment the broader portfolio is under pressure. For clients watching everything else dip, that is often when the value of the programme becomes most tangible.

In the end, the conversation almost always reaches the same place. The first payment lands, and clients want to know one thing: why nobody mentioned this sooner. For the adviser who did mention it, it is one of those moments in wealth management that can genuinely deepen a relationship. And, almost without exception, a second question follows: what else have I been leaving on the table?