Investors should approach promises of easy riches with care
The greater freedom for pensioners to withdraw cash from their pension funds to invest as they see fit and the confirmation that interest earned on peer-to-peer loans qualifies under the new personal Savings Allowance is good news, but should be applied with caution, according to Sacha Bright the founder and chief executive of the UK’s crowdfunding aggregator, BusinessAgent.
“We are already seeing people with sums of up to £500k looking for a better home for their money than an annuity or a bank deposit account, but they need access to good advice and an understanding of any potential risks”, said Mr Bright.
“Peer to peer lending and equity crowdfunding can offer the possibility of good returns, but even those of us working in the industry would say that people looking to invest their savings and pension funds need to be educated on the risks. Businesses operating in this sector are tasked with rigorously promoting the dangers, such as illiquidity and the need for diversification, but the Government should also bear some responsibility for providing this vital education to the general public.”
“With freedom must come responsibility and the last thing people should do is put ‘all their eggs in one basket’”, added Mr Bright. “In addition to seeking outside professional advice, people should also exercise their own due diligence into the areas that influence business success or failure – we call it ‘FROMS’, which covers the areas of Finance, Risk, Operations, Management and Sales”.
“In particular, people must test their own capacity to bear risk and the possible loss of all or some of their money. Even with business loans, as opposed to equity, there will always be some bad debts. And people should never, ever add to their risk by putting all their money into one investment – they must seek diversification to spread their exposure.”
Started by Sacha Bright and his colleagues in November 2014, Businessagent hosts over 40 Crowdfunders and Crowdlenders on its website, including top industry names such as FundingCircle. The site also lists 7,000 private businesses that are for sale.
In February this year, Stephen Hazell-Smith, one of the City’s leading experts on small companies and a founder of both the AIM and PLUS junior equity markets, was appointed chairman of Businessagent.
Business Agent Limited is an appointed representative of Sapia Partners LLP, who are authorised and regulated by the Financial Conduct Authority. Business Agents FCA Firm Reference Number is (FRN: 629625)
Posted: 26th of March 2015