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Peer2Peer Finance News | September 23, 2019

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Innovative, flexible ISAs

Innovative, flexible ISAs

By offering a flexible, auto-lend IFISA, Brian Bartaby, founder and chief executive of Proplend, has created one of the most user-friendly products in finance

WITH ISA SEASON NOW upon us, competition for the burgeoning Innovative Finance ISA (IFISA) market has never been higher. There are now numerous registered IFISA providers, offering a range of products from property loans to business finance to consumer credit. In such a crowded marketplace, it can be hard to make your product stand out, but commercial property lending platform Proplend has established its own niche with its low loan-to-value (LTV), flexible IFISA.

The Richmond-based firm offers an IFISA that is both flexible and auto-lend enabled. Investors can self-select their investments or have their funds auto-allocated to Proplend’s lowest risk ‘Tranche A’ loans – exposed to a maximum of 50 per cent of the property’s value.

“We decided to be flexible with our ISA from day one and consistent with our industry reputation, we have since launched a low-risk, auto-lend facility,” says Brian Bartaby, founder and chief executive of Proplend.

“People have worked hard to fund their ISAs and Proplend looks to offer attractive returns in combination with limited risk exposure. This high level of capital protection is particularly important where individuals are funding their IFISAs with transfers of existing ISAs, often from cash.

“If lenders combine our flexible ISA with our auto-lend facility, they get a low risk, hassle-free product that targets tax-free returns of five per cent after fees. They can now also choose which of our markets (primary or secondary) they want their funds to be allocated to. If the auto-lend returns are higher than the target rate, like the 6.4 per cent per annum it’s currently delivering, this all gets passed on to the lender.”

Since the Proplend IFISA was launched in May 2017, Bartaby has noticed an influx of ISA transfers, around 50 per cent of which are coming from under-performing cash ISAs that aren’t achieving real returns. Interestingly, a growing proportion of transfers are coming in from other IFISA accounts, which demonstrates the investor appetite for flexibility in their ISA investments.

“There is always a spike in interest around March and April,” says Bartaby. “This is because some people are rushing to get their money in before the end of the tax year, and very efficient individuals are putting money in right at the beginning of the tax year.

“Because we offer a flexible IFISA, they can put £20,000 in at the start of the new tax year, and they’ve still got the opportunity to withdraw some of that throughout the tax year and put it back without losing their £20,000 subscription.”

Like most IFISA providers, Bartaby keeps a close eye on the HMRC ISA statistics when they are released each August. In 2016/2017, just £36m was invested in IFISAs, but by 2017/2018 this figure had risen dramatically to £290m.

“I would like to see three or four years of slow increased growth,” says Bartaby. “When you consider that there is a cumulative total of £270bn in cash ISAs and £334bn sitting in stocks and shares ISAs, we’re still very much a needle in a haystack but I think that it will grow over time and become a more significant and mainstream product.

“It’s still a hugely educational process for both the public and financial advisers alike.”