Education, Education, Education

By Sam Hodges on Thursday 10 December 2015

Alternative Lending

It is often talked about how important education is in the alternative finance and a new study has confirmed that a large number of people still don’t understand the industry.

When I say ‘people’, I refer in this instance to financial advisors. We bang on about the importance of business owners knowing more about the sector but it is just as essential for financial advisers (FA) to know the ins and outs of alternative finance.

However, new findings by Intelligent Partnership show how little financial advisors do in fact know. According to the research, only 7% of advisors realised that the FCA regulates the alternative finance space, while only 13% knew that some platforms used contingency funds to protect investors from losses. This is despite 73% of the alternative finance providers IP surveyed stating that they were either already marketing to financial advisers, or planned to do so in the future.

Guy Tolhurst, Managing Director of Intelligent Partnership commented:

"When we asked platforms what they thought the biggest barriers that prevent advisers from investing in the sector were, the vast majority said that it was a lack of education and awareness - so the alternative finance industry knows that they have to do much more to successfully reach out to the adviser community” 

Investing money isn’t hard, but investing money in the correct places can be and a lot of investors will turn to financial advisors for help. So it is vital for FAs to be aware of the sector’s intricacies.

Next year will see the introduction of the new Innovative Finance ISA, which will include peer-to-peer loans and debt securities such as bonds. Thincats produced a piece of research earlier in the year that revealed that 40% of everyday investors would consider investing in P2P when the new ISA is launched.

Tolhurst continued with a message for advisors:

“Our surveys tell us that a lot of advisers don’t know much about alternative finance beyond the headlines in the mainstream press. Reading this CPD accredited report will be a quick and easy way to bring themselves up to speed. It will give them an understanding of the key issues and the differences between models like crowdfunding, peer to peer lending and invoice financing, even if they don’t feel ready to recommend clients invest.”

Geoff Miller from GLI Finance has also weighed in:

“For those who are new to the sector it can be an extremely confusing picture, but it is important to understand the issues that need to be considered and then either do your homework or find a fund that can do it for you.”

Sign up for our newsletters

Your daily 7am download of all things alternative finance and fintech.

Fintech and alternative finance headlines with an exclusive Editor's Note each week. Delivered Monday at midday.

AltFi's new weekly US newsletter breaking down the ins and outs of America's burgeoning fintech sector. Delivered Monday 9am EST/ 6am PST.