Can IFAs ever be turned on to peer-to-peer?

  • neil_edwards.png

    Why the usually mega-opportunistic IFA community has not bought more heavily into the P2P lending market on behalf of its interest-starved clients remains something of a mysteryWith returns from bank deposits still pitifully low and likely to remain so for the foreseeable future it would be difficult to imagine a more benign backdrop against which to sell something so fresh and exciting.

    In a quest for the answer, we undertook some informal research amongst IFAs and were surprised, not only by the answers we received, but by their variety.

    One IFA claimed that its clients "have not shown any appetite for P2P", which is perhaps not surprising if the topic is never raised.

    Another confessed that there is no incentive to promote P2P investment because, following the Retail Distribution Review, IFAs cannot be remunerated by commission. This IFA went on to explain that the research required to enable IFAs to be sufficiently wised-up to offer good advice on P2P does not make the exercise cost effective since the resultant fee chargeable to the client could potentially cancel out any gain, which surely legislates against IFAs ever offering anything new.

    One IFA came out and said: as it's not a regulated product in the eyes of the FCA, we are not giving, and wont be able to give, advice on this area of personal finance.

    Another major IFA group, St James's Place Wealth Management, simply forbids its people to give advice on P2P at all.

    So, what are the facts? Taking the last point first, a spokesperson for the FCA told us there is nothing to prevent an IFA from advising on P2P products or indeed on any other unregulated product provided the client has been made aware of the risks and that this has been fully recorded in the documentation. There is no other barrier.

    Another false belief is that there is an upper limit on P2P investment in terms of a percentage of a clients total portfolio. The FCA says there is no such limit, even on crowdfunding, provided that advice as to risk has been given and, again, is fully documented.

    The only exposure for the IFA is if the advice proves to have been inappropriate to the level of risk acceptable to the client. Even if loans turn bad and investors lose all their money, if the risks were made clear to the investor at the outset, the IFA would be in the clear because that is the nature of ‘investmentas distinct from savings’ (which come under the protection of the Financial Services Compensation Scheme).

    So what is holding back the IFA community?

    Ignorance may be one factor, commercial return may be another, or maybe it is natural caution when faced with something entirely new and untested by the ravages of time.

    One thing is absolutely clear: when returns on P2P investments become tax free under an ISA umbrella, the level of enquiry from the public will peak.  The other significant development is the liberalisation of pensions. Under incoming laws, we are moving into an era where retirement planning doesnt require the purchase of an annuity this alone could unleash a vast wall of cash looking for a home and add to the millions of pounds that already sit idle as cash deposits in SIPPS. There are huge opportunities for the P2P market to offer greater income - and huge opportunity for IFAs and pension professionals to offer their clients good advice.

    Will IFAs take the opportunity? On current evidence, no.

Related articles

  • Read More

    Consumer debt rises while businesses save

    Soaring levels of consumer debt are evidently causing the Bank of England, the Government and others in authority some sleepless nights. According to a recent report in The Guardian, the number of...

  • Read More

    Liberis and Sage launch Sage Pay Business Finance

    Sage Pay has teamed up with alternative business finance provider, Liberis,to give Sage customers access to flexible financing for the first time....

  • Read More

    ArchOver receives FCA authorization

    ArchOver, one of The Marketing Eye’s longest standing clients in the alternative finance sector, has been granted full authorisation by the Financial Conduct Authority (FCA). The news represents a...

  • Read More

    Australian Budget sets scene for FinTech growth

    The latest Budget statement from ‘down under’, on May 9, reaffirmed the Australian Government’s intention to turn the continent into a global fintech centre....

  • Read More

    Insurtech Asia - the insurance sector is ripe for disruption

    The Insurance industry, which for generations has relied on long-established methods and processes (e.g. actuarial tables) to price policies and create a vast store of historic wealth for the...

  • Read More

    InsurTech needs to learn from Altfi and FinTech

    The winds of technology-induced change have been ripping through the financial service industries for quite a while now – banking and fund management being prime examples – but up until now the...

  • Read More

    FinTech as a force for good

    Kids, they say, grow up quickly and nowhere is this more true than in FinTech. Barely five years ago, the phrase wasn’t even invented. Now it is the collective noun for billion dollar enterprises,...

  • Read More

    Insurance Industry jobs could be lost to robots and AI

    Speculating on how far the robot revolution could go is nothing new – Hollywood has been producing apocalyptic films for decades showing machines ruthlessly taking over from humans as masters of...

  • Read More

    What is a bank?

    One of the recurring themes at this year's AltFi Europe event, organised by the excellent AltFi team, was a quest for the definition of a bank, or more particularly a bank of the future. Is it any...

  • Read More

    Giles Andrews' appointment marks another step on P2P’s road to maturity

    Students of the history of finance may one day look back on Giles Andrews’ appointment to the Chair of MarketInvoice (MI) as a major milestone in the evolution of the P2P sector....

Take the first step

To find out more about how we can help you grow faster, please get in touch. We'd like to hear from you.  Or try our instant marketing healthcheck, it's free!

Quick Contact

Quick contact


Contact us

T 01825 765617


Our offices

Full details of our offices in London and Uckfield more

Request a call

'; ';