It has been an exciting week for the UK’s Peer-to-Peer (P2P) sector. The Financial Conduct Authority (FCA) agreed to give full authorisation to several of the sectors biggest names. Which on the face of it may not sound exciting, but it means that the Regulator has given its “seal of approval” (as Anthony Hilton put it in his Evening Standard column on Thursday) to the sector as a new asset class; peer-to-peer is officially recognised as different to asset management and Bank lending.
This means that the P2P platforms without Innovative Finance ISAs (IFISAs) should now have the go ahead to launch them and that is likely to be a game changer. Funding Circle has already announced that its IFISA is coming shortly and with the bigger platforms on board and investors seeking yield you can expect to see more interest and money flowing into these tax efficient vehicles.
Busy as they are likely to be we suspect that the P2P platforms will be keeping an eagle eye on the reaction to the FCA status from the financial adviser community. To date IFAs (Independent Financial Advisers) in the UK have been lukewarm at best about the P2P sector. There are a number of reasons for this – lack of analysis, a shortage of data, the lack of link-up with adviser used administration platforms and of course concern around the FCAs view of the sector – but with FCA approval will this change?
We suspect that it will if only because their clients are seeking yield and at present P2P is offering some of the most attractive yields in the investment world. However, it will take time for advisers to understand the sector, they will need access to data from sites like businessagent.com in order that they might better analyse the sector and provide informed advice to their clients and they will be looking for P2P platforms to link with the administration platforms that they currently use.
So the quiet announcement from the FCA on Thursday is set to have significant, positive impact for Peer-to-Peer investing in the UK. Of course it doesn’t change the inherent risks involved in this type of investing, but it is likely to attract more interest from investors and that is great news for small businesses in the UK that are seeking finance for whom more choice is definitely an improvement.
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