P2P Oversight Set For Welcome Change - Plus Loan Latest


Our friends at P2P Finance News bring news of expected changes to P2P regulation. We recently consulted with the Financial Conduct Authority holding a series of constructive and useful meetings. We look forward to the engagement between the FCA and the Tax Incentivised Savings Association (Tisa), which is well-run and has good people working for it.PEER-TO-PEER lending platforms are gearing up for the introduction of appropriateness tests, in anticipation of the outcome of the Financial Conduct Authority's (FCA) review into the sector.The City watchdog is expected to release final rules on reform of the P2P sector this summer, following controversial proposals released last year which mooted the introduction of categorisation and appropriateness tests for P2P investors.The industry on the whole has supported the introduction of appropriateness tests but expressed concerns about the way they would be implemented and resulting costs. Firms are now working together on solutions.The Tax Incentivised Savings Association (Tisa) has established a working group to create a standard approach for appropriateness tests, which it will present to the FCA.The investments trade body created a similar framework in response to the revised Markets in Financial Instruments Directive (MiFID II) – EU regulations that mandated a greater breadth of investment firms to implement appropriateness tests, although this did not include P2P platforms."The guide will help firms and their customers determine whether and to what extent P2P is appropriate for non-advised customers," Jeffrey Mushens, technical policy director at Tisa, said."This would provide an alternative to the approach of restricting investment in P2P to investors who can demonstrate that no more than 10 per cent of their investable assets could be invested in P2P."The working group is made up of representative industry members and we are aiming to publish a draft guide in June."There are 15 P2P platforms in the group including 'big three' lender RateSetter.Mario Lupori, chief investments officer at RateSetter – who chairs the group – said an appropriateness test can be "very effective in ensuring that investors understand the nature of P2P investments, while not restricting access."

Loans - Latest News

The latest loan from property-backed Seascape closed this week end. This A-rated tranche yields 8 per cent gross will not be the last from this borrower, we believe. New loans and different borrowers are in thew pipeline.

A Process Guide To Innovative Finance ISA Investment

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 £17 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. The annualised bad rate on Money&Co. loans in five years of trading is under 0.04 per cent.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:
  • Step 1: Register as a lender. Go to the login page, and go through the process that the law requires us to effect. This means we have to do basic checks on you to comply with money-laundering and other security requirements.
  • Step 2: Put money into your account. This is best done by electronic transfer. We can also process paper cheques drawn in favour of Denmark Square Limited, the parent company of Money&Co.
  • Step 3: Buy loans in the loan market. Once you've put cash in your account it will sit there - and it won't earn interest until you've bought a piece of a loan. It's this final step that requires lenders and IFISA investors to be pro-active. Just choose some loans - all loans on the Money&Co. site can be held in an IFISA - and your money will start earning tax-free interest.
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.

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Disclaimer: Money&Co.™ is the trading name of Denmark Square Limited, Company Number 08561817, registered in England & Wales, authorised and regulated by the Financial Conduct Authority (FCA). The company is identified on the Financial Services Register under Reference Number 727325. The registered office is 58 Glentham Road, Barnes, London, SW13 9JJ where the register of Directors may be inspected. Denmark Square Limited (ISA manager reference number Z1932) manages the Money&Co. Innovative Finance ISA.