Shifting sands within the peer to peer sector (P2P) have left some retail investors high and dry. There have been reports of retail investors being abandoned in favour of institutional investors; of the surprise introduction of new fees; of platforms pausing investment activity; and of secondary markets being closed drowning any chance of liquidity.
Both the new regulatory measures introduced in December 2019 and the Covid-19 pandemic presented sink or swim challenges for platforms. Some successfully rose to the challenge; others choose to change their model to stay afloat.
The Financial Conduct Authority’s (FCA) new measures were designed to protect retail investors. Among other things they required platforms to ensure investors were aware of and fully understood the risks of investing and raised the bar on reporting disclosures. The extra effort, logistics and costs involved have been cited by some as a reason to withdraw from accepting retail investment.
The press have shared the news of platforms who have closed to retail investors: in February 2020 Orca closed to retail customers, in June Propifi suspended its P2P platform and closed its IFISA; and then in September, RateSetter closed its doors to new retail investors following its acquisition by Metro Bank. From 2nd April this year, RateSetter will be returning capital and interest earned to its retail investors who are no doubt currently looking for an alternative investment opportunity offering attractive returns.
The pandemic also took its toll on some in the sector. In July last year Growth Street wound down; larger platforms Funding Circle and LendingCrowd both paused retail lending in 2020 choosing instead to focus on offering loans under the coronavirus business interruption loan scheme (CBILS) which are funded only by institutional money.
So where does that leave those who invested via these platforms, and retail investors in general? In a strong position to shop around is the simple answer. When compared against other investment options, and in the current environment of stock market volatility and low interest rates (with negative interest being touted), P2P/Marketplace lending remains a very appealing option as part of a balanced investment portfolio.
We’d argue that platforms like FOLK2FOLK, who offer a fixed interest rate of 6.5% p.a. and secure the investment against the tangible assets of land or property, are certainly worth a look.
While other platforms have cut their retail investors adrift, we extend a welcoming hand. We are open to retail investors and intend to remain so. After all, we are a people business. It’s in our DNA and it’s in our name.
We implemented and welcomed the new regulatory steps without issue and remained open throughout the pandemic. We did not take advantage of the Covid situation to increase or introduce new fees for our investors; it remains free to sign up and enter into an investment via our platform.
We’ve seen record buying levels within our secondary market as investors are attracted to our loan investments, creating liquidity for our investors. Currently we’re sold out; with are no loans for sale via our secondary market, though borrower demand remains high so there is plenty of opportunity for investors via our primary market.
Over the past eight years, our investors have funded more than £400m in loans without losing a penny of capital. Many also invest tax-free via our Innovative Finance ISA (IFISA) which pays out tax-free interest monthly, providing investors with a monthly income.
So if you’re looking to add an income generating investment to your portfolio, or perhaps you’ve previously invested via a P2P platform who is no longer accepting your money, then we’d like to invite you to consider investing via FOLK2FOLK. You can find out more about investing via us here or call us to ask any questions: 01566 773296.
Past performance is not a reliable indicator of future trend. Capital at risk. Peer to peer investments are not covered by the Financial Services Compensation Scheme (FSCS). Investment via our platform is subject to our application process and investors successfully completing our Appropriateness Test.