Advisers set to shun Innovative Finance Isa

MetLife’s study found 12 per cent of advisers polled would put their own cash into the new accounts which allow peer to peer loans to be included tax-free in Isas from April.

MetLife’s research was carried out among 107 investment and retirement advisers betwee 14 and 23 January.

According to the P2P Finance Association the market for such lending has doubled over the past year, with cumulative lending of £4.4bn in the last quarter of 2015 compared with £2.2bn in the same period of 2014.

A major concern of advisers polled was that the launch of Innovative Finance Isas will encourage people to use P2P for retirement saving.

Advising clients to take that type of risk is professional suicide. Dan Farrow

Simon Massey, wealth management director at MetLife UK, said: “It is striking that financial advisers are not joining the rush to invest in P2P and are generally cautious about investing their own cash in P2P which does carry risks.

“People need to be fully aware of the possible risks and costs involved in Innovative Finance Isas and weigh up the risks particularly when they are looking for more certainty over retirement income and investments.”

MetLife’s research comes after last month Lord Adair Turner, former chairman of the Financial Services Authority, said losses on P2P lending will “make the worst bankers look like absolute lending geniuses.”

Christine Farnish, chairman of the Peer-to-Peer Finance Association (P2PFA), said these comments were made “off-the-cuff” and, from her understanding, were later regretted by Lord Turner.

Adviser View

Dan Farrow, director of Essex-based SBN Wealth Management, said: “None of my clients have expressed an interest in the Innovative Finance Isa.

“How many clients want and need to take that type of risk? Any client who wanted to would have to do it themselves because I would refuse. My PI insurers would probably run a mile.

“Advising clients to take that type of risk is professional suicide.”