The future is out there – and it’s fast becoming the present. Or rather it will be, just as soon as the investment adviser community realises what’s on offer in the peer-to-peer (P2P) lending market, our very own sub-sector of the alternative finance industry.
In the autumn of 2017, our friends at P2PFN ran the results of an Orca Money survey that showed a disturbing lack of awareness of P2P assets among independent financial advisers (IFAs): “Three quarters of independent financial advisers (IFAs) would recommend peer-to-peer lending to their clients if there were greater client demand, or more independent due diligence tools at their disposal.”
A more recent piece shows some movement, but opinion remains divided as to whether explaining P2P to IFAs and appointed advisers is the way to break P2P into the mainstream.
PEER-TO-PEER lending professionals are divided on the necessity of attracting independent financial advisers (IFAs) as part of their marketing strategy.
At a recent roundtable event held by Peer2Peer Finance News, supported by Kuflink, industry stakeholders discussed the challenges and opportunities presented by the Innovative Finance ISA (IFISA).
Some saw the IFA route as a viable way forward. Others argued that “cutting out the intermediaries” was what P2P should be all about.
For the record, we believe that raising adviser awareness can only be a good thing, as earlier articles on this site demonstrate.
New Loan Offers Expected On Site Soon
A new offering will appear on site very soon indeed. Money&Co. lenders have achieved an average return of more than 8 per cent gross (before we deduct our one per cent fee). That figure is the result of almost £15 million of loans facilitated on the site, as we bring individuals looking for a good return on capital together with carefully vetted small companies seeking funds for growth. Bear in mind that lenders’ capital is at risk. Read warnings on site before committing capital.
A Process Guide To Innovative Finance ISA Investment
All loans on site are eligible to be held in a Money&Co. Innovative Finance Individual Savings Account (IFISA), up to the annual ISA limit of £20,000. Such loans offer lenders tax-free income. Our offering is an Innovative Finance ISA (IFISA) that can hold the peer-to-peer (P2P) business loans that Money&Co. facilitates. For the purposes of this article, the terms ISA and IFISA are interchangeable.
So here’s our guide to the process:
The ISA allowance for 2018/19 is unchanged from last tax year at £20,000, allowing a married couple to put £40,000 into a tax-free environment. Over three years, an investment of this scale in two Money&Co. Innovative Finance ISAs would generate £8,400 of income completely free of tax. We’re assuming a 7 per cent return, net of charges and free of tax here.
Once you have made your initial commitment, you might then consider diversifying – buying a spread of loans. To do this, you can go into the “loans for sale” market. All loans bought in this market also qualify for IFISA tax benefits.
Risk: Security, Access, Yield
Do consider not just the return, but the security and the ease of access to your investment. We write regularly about these three key factors. Here’s one of several earlier articles on security, access and yield.