PEER-TO-PEER lenders have reported a rise in Innovative Finance ISA (IFISA) inflows this ISA season, although there are concerns that bad press in the lead-up to the end of the tax year dampened investor demand.
Industry figures have suggested that the collapse of mini-bond provider London Capital & Finance and a Financial Conduct Authority warning on “high risk” IFISAs could have made consumers wary about investing in the crucial days leading up to 5 April.
One industry source told Peer2Peer Finance News that his platform had seen muted growth in IFISA inflows at the tail-end of ISA season, which he attributed to the bad publicity surrounding the sector.
Adrian Lowcock, head of personal investing at Willis Owen, pointed out that the last few days before the end of the tax year are vital for ISA inflows.
“There is a general trend that shows the last couple of weeks usually see an uplift in ISA demand,” he said. “It is just human nature – we tend to leave things to the last minute.”
However, some P2P lenders have still reported substantial growth in IFISA inflows, even if bad publicity were a tailwind.
On 4 April, RateSetter reported it had attracted £200m in subscriptions.
The platform subsequently said that it had attracted a few million pounds more in IFISA inflows in the two weeks following 4 April.
Industry-wide figures from investment trade body Tisa show that, between 5 April 2018 and 5 March 2019, the value of IFISAs rose by about £469m to £652m, representing a more than 250 per cent increase. However, this figure excludes April as it is calculated a month in arrears. It also excludes Funding Circle, which now has the reporting restrictions of a listed company.
Taking all this into account, there could now be close to £1bn in IFISAs, suggested Downing’s head of digital distribution, Ceri Williams.
He noted the average value of IFISA investments has remained fairly stable at around £12,000 to £13,000 over the past year.
“This is interesting as it just bumps along at a very consistent rate,” said Williams, adding it is a high proportion if someone has the whole £20,000 ISA allowance to invest.
Meanwhile, the number of IFISA accounts has been rising steadily over the last year from 18,885 to 51,371.
Williams said that Downing’s own IFISA inflows were in line with expectations, although “we’d like a little bit more”.
“The market is getting very competitive with 91 IFISAs now available, so it is a congested space that everyone wants to go after,” he said.
Read more: Five ways to add IFISA diversity
With regard to recent bad press, Williams added: “There is a popular misconception that all providers are in the same bucket and tarnished with the same brush, which doesn’t help in a competitive environment.”
Although negative headlines may have stalled IFISA sales to some extent, Lowcock noted that this ISA season in general is expected to have been quite muted compared to other years, with Brexit uncertainty and global growth fears weighing on investor sentiment.
This article featured in the May issue of Peer2Peer Finance News, which is now available to read online.