Peer to peer lending is a dynamic market that is much more mature than many give it credit for. It is fully regulated, home to significant institutional investment and provides excellent inflation-beating, fixed income diversification opportunities. But, it is a relatively new asset class with a range of platforms and operating models, not to mention regulations.
This guide is intended to help financial advisers and planners to get to grips with how P2P can fit into their service offering and what it can do for their clients.
Martin Heelam talks about the impressive volume of applications since Assetz Capital’s Innovative Finance ISA (IFISA) launch in December 2017. So far, this has been mostly investor-driven. Heelam expands on why that has been, and why the IFISA is central to products like those offered by the peer-to-peer lender – asset-backed loans to businesses – becoming mainstream investments which advisers routinely consider. He particularly singles out Assetz Capital’s transparency in terms of helping advisers to carry out due diligence.
Gillian Roche-Saunders, partner at BWB Compliance, talks about why the Innovative Finance ISA (IFISA) has been slow to take off and what the process should be for advisers in terms of due diligence on each platform. She expands on how advisers can integrate qualifying investments into their proposition, from compliance to professional indemnity insurance to matching clients to appropriate investments across the “spectrum of risk” available in an IFISA.
On the eve of Octopus Choice’s second birthday, Caroline Flagg talks about where inflows are coming from following the launch of its IFISA. She reports that 750 advisers are now using Octopus Choice for themselves and their clients, the comparatively larger size of advised investments, and investor demographics. She then goes into the specific workings of Octopus Choice, how it builds on Octopus Property, an established business providing bridging loans against UK property since 2009, and Octopus’ first lost position.
Belinda Thomas discusses Triple Point’s Advancr Bonds and how these products evolved. She discusses consumer protection in terms of underlying security and Triple Point’s responsibilities as an IFISA manager. As an established manager in the tax-efficient space, she talks about pre-existing relationships with advisers and a growing volume of cash transfers.
Julia Groves, partner & head of crowdfunding at Downing LLP, talks about growing uptake of bonds in its Innovative Finance ISA (IFISA) and advisers’ changing attitudes to these investments. She covers terms of investment, diversification, risk and the two kinds of products offered on Downing’s platform: fixed-term debt-based securities and a newer regular access bond. On choice in the market, she discusses how many IFISA-authorised platforms are genuinely adviser-ready and reveals something surprising about average investment size.
Jake Wombwell-Povey, CEO and co-founder of Goji, discusses increasing inflows after the Innovative Finance ISA’s slow start and what percentage are transfers from cash ISAs. In the direct lending space, he discusses the end of the ‘early adopter’ phase for retail investors, Goji’s increasing focus on advisers and the demographic of clients they recommend these investments to. The discussion takes in Goji’s history, status as an aggregator and approach to due diligence on the lenders it works with.
HM Treasury has referred to the IFISA as a way to, “provide ISA holders with greater choice over how to invest and will support the crowdfunding sector to continue to grow as a source of alternative finance for businesses.” The inclusion of additional consumer protections which must be present in the P2P and debt based securities investments that are IFISA eligible can only be reassuring for potential investors. But there are a number of other considerations as well as the everyday practicalities. Our goal with this guide is to give advisers an understanding of these so that they build the confidence to make the best use of the opportunities that the IFISA presents for their clients.
As with many of the investments we cover, the case for investing in debt based securities is compelling. They can provide yield and genuine diversification at a time when both are at a premium among conventional assets, with lower levels of volatility than equities.
Innovative online lender to borrower matching has given peer to peer lending platforms a cost advantage over the larger and less nimble traditional finance institutions, leading to very attractive rates for those looking to invest and those looking to borrow.