Access, Security, Yield – ‘Holy Trinity’ Of P2P And IFISAs Revisited
We’re pleased to report strong interest in the new Innovative Finance Individual Savings Account (IFISA), following the award of full permissions by the financial services industry regulator, The Financial Conduct Authority.
IFISAs typically contain peer-to-peer (P2P) loans of the kind offered on Money&Co.’s site. ~But these are early days for P2P crowdfunding. Our friends at P2P Finance News report conservative attitudes amongst savers, who place easy access high in their priorities, even though they may be dissatisfied with returns on cash:
“Almost two thirds of consumers are dissatisfied with the savings rates on offer from their bank or building society, but few are prepared to take more risk with their money, research suggests…
“Just 13 per cent of respondents out of a survey of 1,000 consumers said they were always willing to take risks in order to get the best return on their money.
“Expectations of a return for their savings remains high despite prevailing economic conditions, with 44 per cent expecting a rate of return on their investments to be between five and 10 per cent.
“Savers are also demanding a higher level of flexibility from their savings providers, with 84 per cent expecting the option to access funds at short notice. Other big frustrations with traditional savings include high service fees and strict penalty charges, which has led to 58 per cent now saying they trust their bank less than they did five years ago.
“As a result of these challenges, over half of savers (58 per cent) trust their bank less than they did five years ago.”
Here at Money&Co., we have reported consistently on the issues addressing these concerns. “The Holy Trinity” of security, access and yield are key criteria for investors to address. Here’s an extract from one of several earlier articles on this topic.
- Security – The extra security of the FSCS may be very attractive to some. The guarantor of up to £85,000 of deposit is effectively the UK government. Money&Co., while licensed as an independent financial adviser and answerable to the Financial Conduct Authority, does not offer such security. But we do ensure that a debenture, a legal charge, is taken on our borrowing companies’ assets to protect our lenders. And of course our credit-analysis is very rigorous.
- Access – Do you need access to your cash in the short term? If so, the fixed-term provisions of the deposit accounts may seem onerous. Money&Co.’s loans can be for as short a term as one year. Most are longer, with a maximum term of five years. But if you want to take your cash back early, you can do so using our recently launched auction market. This means that you can sell your loan at any time to another Money&Co. lender.
- Yield – Deposit accounts are linked to long-term interest rates, which are a lot lower than the yields offered by our borrowers. Money&Co. has successfully hosted the funding of several companies rated a B+ risk, with loan yields of more than 8 per cent.”
Remember, capital loaned is at risk.We have a rigorous due diligence process and require borrowers to be debt-free ahead of facilitating a loan, and we also take a charge on the assets of the borrower as a safety net in the event of default. But do not lend without assessing risk carefully.