View more on these topics

Leader: There’s a reason for the kid-glove approach to P2P

Natalie Holt, journalist with Money Marketing Photo by Michael Walter/Troika

Instinctively, I am wary about peer-to-peer lending. The idea is regular investors become like banks, lending out their own money to other members of the public. But if these are borrowers that traditional banks will not lend to, should Joe Public really be the one to step up to the plate instead?

The P2P market is increasingly moving into the mainstream. This is thanks to some serious involvement from the Government, namely creating the “Innovative Finance Isa” allowing P2P investments to be held in an Isa wrapper. The Government is also looking whether Sipps will also be able to hold P2P loans in future.

The case studies pointing to the dangers of P2P lending have already started to emerge. Last year it was reported Swedish website TrustBuddy, which had lent out £23m of investors’ cash, filed for bankruptcy following “serious misconduct” which created a £3m black hole. Savers who lent out their money were told it was “highly unlikely” they would get any of it back.

I am not the only one that is wary about this sector. All but the niche Sipp players have shied away from playing in this market, partly due to tax rules about commercial lending. Yet if you strip that out there is still a sense that the fear factor around P2P is just too great. Advisers too, are yet to be convinced about the merits of this market. Since April, those that are happy to dabble in this space have to have the appropriate regulatory permissions to do so.

As usual, the FCA is playing catch-up on Government policy, and has released a number of papers and statements on the issue of P2P market as it scrambles to write the rulebook for a growing market.

As at 30 March, the regulator had granted full authorisation to operate a P2P platform to eight firms. A further 86 firms were awaiting a decision, of which about half had interim permissions.

Sipps have always been about offering more alternative investments, and yet even the Sipp providers feel P2P is a bridge too far.

Perhaps the Government is so keen to push P2P in light of the pitiful returns on deposits that show no sign of improving, at a time when interest rate hikes are an all too distant memory.

But a market that offers no compensation via the Financial Services Compensation Scheme, and is likely to see more D2C investors than advised, does not sound like a healthy combination to me.



BlackRock invests £12.7m in P2P lending

BlackRock has emerged as the third biggest holder of the investment trust behind peer-to-peer lending platform Funding Circle, with an investment of £12.7m shares. The Financial Times reports the transaction was made in December according to Bloomberg data. The position marks the first time the fund group has offered retail investors exposure to peer-to-peer lending […]


News and expert analysis straight to your inbox

Sign up


There are 2 comments at the moment, we would love to hear your opinion too.

  1. Yet another ‘expert’ claiming that p2p lenders lend to people who can’t get funding from banks. Do 30 seconds of homework and you’ll see that this simply isn’t true – they lend to the same people banks do, but at much better rates. Another shill for the rip off status quo. Sad.

  2. @ Andrew Martin

    “……they lend to the same people banks do, but at much better rates”

    In which case this is even worse. They provide better interest rates for lenders, charge lower interest rates to borrowers and usually have a greater default rate than the banks. And this is a good business model and one in which to invest?

    You can chuck your and your clients money away, but most of us would prefer a somewhat more robust model in which to place funds.

Leave a comment


Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm