Further doubts have been raised over the willingness of financial advisers to engage with the Innovative Finance ISA.
MetLife Europe Limited – a financial services company based in Dublin with a significant presence in the UK – has unveiled the findings of a pair of recent surveys about adviser sentiment in relation to the soon-to-be-launched IFISA. Of the 107 specialist investment and retirement advisers that were surveyed by Pollright (on behalf of MetLife) in January 2016, just 12% would invest their own money through an IFISA wrapper. The major fear among those polled appears to be that the launch of the IFISA will encourage the use of peer-to-peer investments for the purpose of retirement saving – an eventuality that 31% of advisers are concerned over.
These findings chime with the results of Intelligent Partnership’s recent study of the alternative finance space. The report revealed that 27% of alternative finance platforms had no plan in place for marketing to IFAs (correct as of December 2015). We also learnt that only 7% of the advisers surveyed realised that the many different moving parts of the alternative finance industry are regulated, while a mere 13% were aware that some of the peer-to-peer lending platforms use provision funds as a means of mitigating investor risk.
There certainly appears to be a certain level of uncertainty amongst financial advisers when it comes to the new IFISA. Those doubts appear to be at least in part a product of a lack of education, and the onus will be on the platforms to rectify that imbalance.
Simon Massey, Wealth Management Director at MetLife UK, offered his thoughts on the results:
“The P2P sector is growing strongly and offering attractive returns particularly when interest rates are at an all-time low and likely to remain there which could put pressure on cash ISA savers to find alternative investments.”
“However 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.”
Appropriate risk appraisal is an important facet of any investment decision. It is worth noting, however, that MetLife offers an ISA product of its own – the MetLife “Guaranteed ISA”. The company’s risk warnings are reminiscent of those issued by Yorkshire Building Society across the course of 2015. Yorkshire announced in September that as many as 728,000 over-65 year olds would consider investing in peer-to-peer lending. However, the building society harboured significant concerns over how well acquainted such investors were with the various risks associated with P2P – particularly the lack of FSCS protection.
MetLife also conducted a survey of 1,000 adults in the UK aged 45 or over, finding that 16% of over-55s would consider investing through the IFISA from 6 April onwards – due largely to the potentially high returns on offer. Those returns appear to have caused enough concern among the incumbents to birth at least a half dozen surveys about the perceived "riskiness" of P2P.
Financial advisers may not be queuing up at the doors of peer-to-peer platforms come 6 April, but that may well change once their clients begin asking for more information on the new-fangled IFISA and peer-to-peer lending. As Goji Co-Founder Jake Wombwell-Povey recently put it:
“I doubt even the wildest Alternative Finance enthusiast is suggesting that investors should put their entire portfolio into P2P lending. However, in light of recent market turbulence that has affected the value of even supposedly the ‘safest’ of assets, P2P’s position as an uncorrelated and low volatility asset class with consistent and attractive returns, that can now be enjoyed in tax free ISAs as well as tax free SIPPs, can no longer be ignored by either the direct or advised investor.”
AltFi is returning to Amsterdam for its second annual Summit in the city. The inaugural event last year was a roaring success, with key figures from across Continental Europe's alternative finance and digital banking sectors highlighted. These included Jeroen Broekema, managing director of Funding Circle Netherlands, and Mieke van Engelen, head of innovative partnerships at ABN AMRO's standalone lending platform, New10.