Mr Webb said: “There are not many good returns in the [property] market, and valuations are a bit toppy; we’re in the cycle now and we will start to see some people come unstuck in terms of the lending.”
So, what level of detail should advisers be going into with due diligence if they are to tell the difference between P2P providers that will survive in a market downturn and those who will run into trouble?
Mr Faulkner said a lack of information about a P2P provider, the types of loans available and their practices should be an immediate red flag for advisers and their clients.
He said: “Where the data is so easily available, if you’re looking at their website and you’re not overwhelmed with information, you may as well say, ‘Forget it, let’s find something else’.”
Mr Webb suggested advisers should consider following the lead set by institutional investors, which were investing a lot of money into P2P, and seeing where they put their money.
He said: “Look at what institutional funds do when they invest: they do significant due diligence. They put £50,000 into these processes and do monthly reporting so they can see significant deterioration.”
As a P2P provider, Mr Marsland revealed he fully expected advisers to ask lots of questions and really peer under the hood of the P2P investments his company offers.
He said: “We try to be as transparent as we possibly can.
“It is difficult when you’re looking at a loan book of 300 different properties, but we have a statistics page where you can see every single loan on the platform, so you can see what they’re borrowing and what we’re giving to the client as well.
“You can see where that property is geographically, you can see what the type of loan is they’re in. For example, it might be a bridging loan or a buy-to-let – they are quite different types of loans.”
Ongoing checks
Advisers gathered at the masterclass, which took place at the Financial Times’ offices in London last month, were also keen to find out from a regulatory standpoint how you assess the ongoing suitability of a P2P investment.
Mr Faulkner replied: “You need to go and search for yourself; regularly go back and look at what’s going on – are the people still there? If they are new people, do they have experience?”
What was identified as key to preventing any problems further down the line was making sure advisers are clear in the first place who is suited to this type of investment in the first place and that the client knows what to expect from P2P.
