NEW Financial Conduct Authority (FCA) rules for peer-to-peer lenders will lead to more advised sales in the sector, industry sources have claimed.
The regulations came into force on 9 December, and require all platforms to assess investors’ knowledge and experience of P2P investments before they accept their money.
Other rules include strengthening rules on the plans for a wind-down of platforms if they fail and placing a 10 per cent limit on investable assets for retail customers who are new to the sector and haven’t received professional advice.
But several industry sources told Peer2Peer Finance News that the strict regulations represent a new opportunity for P2P lenders to court the independent financial adviser (IFA) market.
“Because of tighter regulation IFAs will be more comfortable saying ‘now that is a more mainstream asset class it’ll be good to have in a diversified portfolio’ and I think more people will be saying that now,” predicted Michael Bristow, chief executive and co-founder of CrowdProperty.
“It’s really important for platforms to do this well so that the standards of the rest of the industry are increased because clearly there are reputational risks if a firm doesn’t do a good job.
“And we as an industry want to see P2P lending as a sector that adds value, to flourish and to grow.
“At the end of the day regulation costs time and effort to resource but that’s part of participating in a sector and is incredibly important.”
Roxana Mohammadian-Molina, chief strategy officer at Blend Network, said that regulation is a good thing in that it offers more protection to retail investors and will lead to more advised sales.
“Regulation gives increased protection for retail investors which is a good thing for the whole industry and that’s why we think more retail money will be coming into this space,” she said.
“For IFAs it’s an interesting time because a lot of the clients will be asking for alternative products such as P2P in particular.”
Meanwhile, Mario Lupori, chief investments officer at RateSetter, said that the level of interest from IFAs has been rising.
“The tougher regulations for P2P investing were seen as a watershed moment for the industry, putting it on a par with other mainstream investment options and paving the way for mainstream adoption of this asset class,” said Lupori.
“P2P is now a logical component of everyone’s diversified investment portfolio.
“The level of interest among financial advisers has been ticking upwards, particularly those that have been hunting for a more rewarding alternative to cash savings.”
RateSetter recently announced plans to launch a product specifically for financial advisers which will make it easy for them to access and manage P2P investments.
“Our target is that it becomes normal for an investor with a diversified investment portfolio to include an allocation to an investment product like ours,” he added.
Read more: Adviser appeal