In fact, platforms will now be expected to be able to demonstrate with reasonable certainty that any advertised target return rates can be achieved.
A new, more standardised definition of default will also allow advisers to compare the various platforms more easily.
Importantly, the FCA rules drive higher levels of professionalism.
P2P platforms should from now on have an independent compliance function, if it is proportionate.
Whoever is in charge of a platform’s risk management framework will need to be approved in the Senior Managers and Certification Regime (SM&CR).
One of the big risks in P2P platforms has traditionally been of a platform collapse.
The new rules include guidance in what platforms should consider to ensure that, if they were to go into administration, they have arrangements in place to ensure their loans continue to be managed.
The effect may be even more pronounced following the temporary market intervention from the FCA into mini-bonds, due to come into force at the start of 2020. Under these rules, investment in a wide spectrum of corporate bonds will only be allowed for sophisticated and high net worth investors.
Advisers who had previously been using these bonds to earn their clients a consistent, inflation beating return on a portion of capital will be forced to look elsewhere, and P2P could be one of the few options remaining.
There are still challenges of course.
Many advisers are still cynical about P2P, while many P2P platforms still see direct marketing as their best route to market.
Writing in an Intelligent Partnership Adviser’s Guide to P2P Lending last year, Octopus’s Sam Handfield-Jones noted: “With a vast array of products out there, each one offering a different risk-return profile, it’s more important that investors know exactly what they’re getting into. And advisers have a powerful role to play.”
It would appear that the regulator has agreed with this assessment.
Jonathan Minter is a senior editor at Intelligent Partnership