Peer-to-peer lenders embrace new ISA
Despite wariness amongst financial advisers about pushing the new Innovative Finance ISA, many peer-to-peer (P2P) lenders say there is strong interest in the new saving vehicle amongst new and existing customers, FT Adviser has found.
When asked by FT Adviser last month if they would be offering the new ISAs to their clients, many advisers expressed concern that P2P lending is not yet covered by the Financial Services Compensation Scheme and that it had not yet been tested in a stressed economic environment.
The lending platforms themselves, FT Adviser found, acknowledge that, as an industry, they need to do more work to inform advisers about the benefits of P2P lending to persuade them to embrace it.
As to fears that P2P lending has not been tested in adverse economic conditions, the platforms note that Zopa, which has been operating for a decade, survived the economic downturn. Other platforms point out that while they have not endured a recession, they are performing well even though the post-recessionary economic climate could hardly be described as a boom time.
Platforms such as Unbolted, moreover, effectively abolish investor and borrower risk by offering a secured asset loan. Borrowers place a high-value possession under the platform’s control for the duration of the loan, settling when the term matures or allowing the asset to be sold at auction.
As Crowdfund Insider contributor JD Alois puts it: “With over 22 million adult ISA in the UK and assets nearing £500 billion the opportunity for P2P lenders is clear. For the P2P industry in general, it is just the messaging, and education, that must be addressed.”