NEARLY two thirds of UK adults recognise that Innovative Finance ISAs (IFISA) can offer higher returns, a tax-free wrapper and greater diversification, according to ArchOver research.
However, the peer-to-peer business lender found that while 61 per cent recognised certain benefits of the IFISA, only 36 per cent of people surveyed would place their money in the product.
The research also found that 57 per cent of respondents did not fully understand the product. ArchOver says this demonstrates that the industry needs to do more to educate investors.
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“IFISAs are fundamentally different to cash ISAs in the way they operate,” said ArchOver chief executive Angus Dent. “Meeting investors’ expectations and making them feel secure at the same time will require ongoing education. Our research shows that nearly half (48 per cent) of savers are nervous about losing their money, so the industry needs to communicate the benefits and safeguards clearly.
“The IFISA gives you the freedom and flexibility to choose your own investment. Investors must use that power to choose an option which combines the best elements of P2P lending: thorough due diligence, rigorous lender security and favourable returns. They must do their research to gain insight into the companies they’re investing in and should not ignore the job of diversifying their portfolio to balance out their risk.”
26 per cent of savers said they felt reassured by regulatory oversight, such as the Financial Conduct Authority’s recent approval of many P2P platforms including ArchOver.
“Although IFISAs have an associated risk like all investments, investors and savers can get a greater level comfort by choosing a P2P platform that carries out stringent due diligence and credit analysis of all potential borrowers,” added Dent.
The research of 2,000 UK adults was commissioned by ArchOver and completed by a third-party research house in September 2017.
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