Financial adviser and self-invested personal pension take-up of peer-to-peer lending products has been slowed by “paranoia” over perceived risks associated with the relatively new investment option, according to one provider.
Speaking to FTAdviser, Ratesetter’s senior commercial manager Ceri Williams, said that so far IFAs have struggled with these new products, partly due to paranoia around their liability in recommending P2P, especially given some have had their fingers burned by the Financial Ombudsman Service in the past.
“Advisers are not used to buying products like this, they’re happier dealing with closed ended funds and accessing things on platforms these days.”
Similarly, trustees overseeing Sipps have also taken time to warm to P2P products, although Ratesetter was amongst the first to sign distribution agreements with providers in the spring, enabling customers to lend within their pension tax wrapper.
Mr Williams said that in just the last three weeks around £350,000 worth of Sipp money, across several trustees, has been lent via Ratesetter, although he noted that all of this has come through the non-advised route so far.
P2P lending through Sipps was restricted by rules which required providers to hold higher levels of capital for non-traditional investments, leaving small self-administered schemes as the only wrapper that could accommodate the asset class.
However, changes announced in last year’s Budget appear to have opened the market to a wider array of pension income options.
A consultation is expected from the Financial Conduct Authority on the various standard and non-standard asset classes that can be held within a Sipp, something which Mr Williams said was not coming a moment too soon.
“The risk profile is pretty low versus return potential, I think consumers are being held back by having to pay extra to go into things like peer-to-peer,” he commented.
Writing for FTAdviser earlier this week, Kevin Caley chief executive and founder of P2P platform ThinCats, admitted that the fact the FCA still classifies P2P loans as non-standard investments currently makes it difficult to recommend them.
However, the summer Budget announcement of a new Innovative Finance Isa - due for launch next April - is likely to make it hard to avoid reclassification.
Mr Williams mentioned that Ratesetter was already well underway with building out capacity and structures to facilitate the new Isa, with regulatory consultants Bovill warning that the regulator may struggle to cope with the amount of alternative lenders looking to become fully authorised in time.
Research from Yorkshire Building Society this week revealed that almost 750,000 pensioners are considering P2P lending following the April at-retirement reforms, despite the lack of Financial Services Compensation Scheme protection and potential issues with ease of access to their cash.
In July, Ratesetter signed an agreement with wealth management technology firm FNZ to help smooth the way to getting P2P onto the various platforms it backs.
Mr Williams explained that development on the product is underway, with a roughly three month build meaning that things should be ready to go live early in the first quarter next year.
peter.walker@ft.com
