“There is no quick fix, people will get P2P over time”
The COO of the peer-to-peer platform Relendex, Max Lehrain, is concerned about the Financial Conduct Authority’s crackdown on P2P lenders and crowdfunding platforms.
Following fears that investors are taking more risks than they think they are, the FCA last summer proposed stricter rules for the P2P industry, which has grown significantly over the past decade as banks were pulling out of high-risk loans.
The FCA said it was concerned that an interest rate hike could trigger a wave of defaults on many high-risk loans facilitated by P2P lending websites.
As a result, the FCA proposed that P2P lenders should publicly disclose their actual rates of return, default rates, as well as the risk and duration of loans.
He also proposed restrictions on marketing, which means that P2P platforms will only be able to send financial promotions to sophisticated or high net worth investors.
The regulator has also proposed that P2P platforms can only market to those who confirm that they will receive regulated investment advice and to those who agree not to invest more than 10% of their net investable portfolio in investments. P2P agreements.
Mr Lehrain, who has gone from tax advice to investment advice and then to a pension management company over the past 30 years, agrees P2P should never be seen as an alternative to investing in cash .
However, he believes that independent financial advisers should always offer their clients the option of investing in P2P, while clarifying the risks that such investments pose.
Mr Lehrain said: ‘There are billions of pounds invested in Isas in cash, yielding 1% or less.
“I am not suggesting that what we are doing is a direct alternative for this, but it is relatively safe and should surely be seen as part of a portfolio by Isas and the direct investors.”
When he insists on the security of P2P – this type of investment is currently not subject to the protection of the Financial Services Compensation Scheme – Mr Lehrain says there are problems in the space of small and medium enterprises and that it remains to be seen how P2P works in an economic downturn.
Mr Lehrain said Relendex had never defaulted on more than one loan, estimated at £ 594,000 and in the process of being collected.
He says, “The recovery process is underway, and although we expect a full recovery, it may take some time. ”
But he insists that issues like flaws shouldn’t keep this product from being on advisers’ radars.
He adds, “I like that we have new issues to solve that haven’t been addressed before because it’s a new market. ”
But he doubts the viability of the FCA’s recommendation that clients should not invest more than 10 percent of their net worth in P2P investments.