While the peer-to-peer lending market has been popular with retail investors and the Innovative Finance ISA (IFISA) has launched this month, Intelligent Partnership’s research shows that financial advisers remain cautious, with the FCA even raising concerns over advisers’ ability to comply with FCA requirements on peer-to-peer due diligence. However, that could all be about to change with a new solution specifically tailored for advisers from the UK’s fasted-growing fund management company, Octopus Investments.
Octopus announced today that it is working with financial advisers to launch a new online lending product, ‘Octopus Choice’. The new product will provide a middle ground between saving and stock market investing by investing in a discretionary managed portfolio of asset-backed loans, customers will be able to target higher interest rates than deposit accounts.
Simon Rogerson, CEO of Octopus Investments, commented: “The growth of peer-to-peer lending shows no sign of stopping, and the sector presents a powerful opportunity for financial advisers to add value to their clients. But it’s currently being overlooked – and we want to change this. By working with the adviser community, we hope to help advisers play a central role in shaping the market as it continues to grow, developing a product that solves real needs for their clients.”
Investments into Octopus Choice will initially be allocated to loans secured against residential property – accessing the existing dealflow and track record of property lending through its Dragonfly Property Finance business. Octopus will also invest in each and every loan, on a ‘first loss’ basis.
Daniel Kiernan, Research Director of Intelligent Partnership, commented: “This is good news. The research we carried out for our Alternative Finance Industry Report indicated that up to now advisers have been very wary of peer-to-peer lending, and in fact many were quite uninformed about the sector. With Octopus stepping in that looks set to change. They have a done a good job of reaching out and educating advisers about tax efficient investments, so I’m sure they can repeat that success in the fast-growing online lending market.”
In addition, Octopus Choice will provide advisers with the potential to develop new income streams. Facilitating both up-front and ongoing fees, it will allow them to broaden the scope of their advice to include some of their client’s deposits that are earning low levels of interest in savings accounts or cash ISAs – money which, until now, advisers have been ill-equipped to serve.
Richard Lord, Managing Director of Bartholomew Hawkins – a Cardiff and Bristol-based firm that provides independent financial advice to both private and corporate clients – commented: “Beyond ISAs and the now maturing stock of structured products, there has been very little that we as financial advisers have been able to recommend in this area. As the name suggests, this new product from Octopus will provide us with additional choice – a middle ground solution that targets higher rates than deposit accounts, but with less risk and volatility than stocks and shares. We’re really excited about what the product could mean for our clients, and are delighted to be involved in shaping it.”
To capture their opinions and insights, Octopus has launched a public phase of testing with advisers across the UK – before rolling out a full version in due course. Advisers who wish to take part in the pilot can register their interest at www.octopuschoice.com.