The new decade was welcomed with a new industry body to represent the P2P sector – 36H.
36H has supplanted the Peer-to-Peer Finance Association (P2PFA), which closed after it’s objectives were met with the launch of the Financial Conduct Authority’s (FCA) P2P regulations at the end of last year.
The P2PFA was a self-regulatory body, whose mission was to lobby for better regulation. It also provided minimum standards for its members. The new FCA regulations went beyond most of the P2PFAs rules, providing sector specific regulations from definitions of defaults to rules around underwriting and disclosure.
With a more robust, mature regulatory environment now created, the P2PFA said it had achieved its primary objective.
“Now that platforms are in the mainstream of financial services for both investors and borrowers, this is the right moment to recalibrate, and I look forward to seeing the industry go from strength-to-strength into the future.” said Paul Smee, the former chairman of the P2PFA.
If the P2PFAs aim was to lobby the FCA on creating more sector specific regulation, 36H must now pick up the batton and monitor how these regulations affect the industry in practise.
Some parts of the FCA regulations were contentious. Some argued the FCA’s costing analysis was wildly unrealistic, while the 10% limit for restricted investors was unpopular in the industry.
36H is now responsible for providing a voice for this industry, and it will be the main body lobbying the FCA to drive future changes.
Industry acceptance and education
One of the areas the P2PFA sometimes struggled with was attracting members. Ratesetter famously left the association in 2017, despite being a founding member. Ratesetter is also a founding member of 36H, alongside industry heavyweights Funding Circle, Zopa, Lending Works and CrowdProperty.
While this captures the so-called ‘big-three’, several of the most significant players are still to join – notably Assetz Capital, Octopus Choice and Folk2Folk. Between them, these three platforms have lent over £1 billion since they launched.
As the name indicates, 36H Group is open to any company regulated under Article 36H of the Financial Services and Markets Act 2000, the legal basis for retail investment via lending platforms.
As 36H will not be providing minimum standards, it should have an easier time attracting new members compared to P2PFA. It is hoped that a strong, united, industry voice will help it reach new audiences.
Despite its success attracting retail and institutional investment, the P2P sector still has a long way to go in attracting financial advisers. This is despite P2P offering these advisers a way to diversify some of their clients money into something more stable than equities, while still offering inflation beating returns.
Educating IFAs about its risks and advantages will likely be key to succeeding here. A survey of 50 IFAs conducted by Intelligent Partnership in 2019 found that less than 20% described themselves as ‘very’ familiar with P2P, with almost 1 in 10 describing themselves as not familiar at all. The same survey found 15% of advisers had not even heard of the Innovative Finance ISA, and a further 38% said they had heard of it, but did not know much about it.
P2P provides a solid option for those looking to diversify their portfolio. It could really help cement the industry’s position as the third pillar of wealth management, next to investments and cash. But, for it to truly succeed P2P will need 36H to provide a unified industry voice to relay information to the regulator, and provide educational opportunities for IFAs.