IFAs are not that impressed with peer-to-peer lending schemes.
So says new research from the Yorkshire Building Society which concludes that less than one in five IFAs would invest, or already have invested their own money into peer-to-peer (P2P) lending schemes.
What’s more, the research reveals that the vast majority of IFAs (over 80%), do not think that their clients understand P2P lending rules. Take it one step further and the figures show that 62% of IFAs would never invest their own money in P2P despite the potentially attractive rates on offer. Some 20% are undecided.
This is against a backdrop of strong growth predicted for the P2P industry which almost trebled in size last year; now worth more than £1.3 billion. Compare this to the £57bn placed in cash and stocks and shares ISAs.
As for what IFAs think of the future of peer-to-peer lending, around 45% believe interest in will grow as new savings rules come into effect. Also, some 20% have already seen increases in inquiries from clients about investing in P2P over the past year.
At the consumer end of the market, the research showed that there is strengthening appetite for risk ahead of new rules on ISA flexibility and tax-free saving allowances due next year. Figures revealed that about 10% of people questioned said they will definitely consider riskier investments. Also, 37% would look at riskier investments depending on their circumstances.
“…but, perhaps more worrying, 60% of those were unaware that they had no protection under the FSCS.”
As for the term peer-to-peer lending itself, only 42% of consumers said they were familiar with the term, but, perhaps more worrying, 60% of those were unaware that they had no protection under the FSCS.
Executive Director at Yorkshire Building Society Andy Caton said: “Investing in P2P can offer strong possible returns but people need to be fully aware of the possible risks and costs involved.
“It is clear that many financial advisers have concerns about consumers’ understanding and are unwilling to invest their own money in P2P despite the potential returns.
“It is good that the Government has decided to create a new and separate type of P2P ISA instead of linking it to the existing stocks and shares option, which will help to limit potential confusion among consumers.
“We hope our research and guide highlights the importance of making sure the risks and possible returns are considered. We would urge anyone considering investing in P2P to discuss their options with a professional adviser.”