Peer-to-peer lending will prove itself in the test of its first economic cycle and this will attract more retail investors and independent financial advisers (IFAs), Stuart Law, chief executive of Assetz Capital, has claimed.
Law (pictured) noted that some industry onlookers have been reticent about the sector because it had not yet proved itself during a crisis. Once P2P has survived the downturn, there will be an influx of IFAs and new investors, he predicted, helping the sector to become a more mainstream asset class.
“We’ve all been waiting for P2P lending to go through a cycle,” Law said.
“Hopefully the industry will show its place; if it doesn’t there is no future for P2P. Those platforms that come out of the next recession will prove their models work even in what’s forecasted to be the worst economic time in the nation’s past 200 years.
“A big reason why IFAs haven’t really taken to P2P lending was the valid reason that it had never been through a cycle, and we will see the sector taken more seriously when it goes through one.
“And hopefully investors will see P2P produces steady returns and that there is less volatility than the stock market. This will attract many investors in the coming years.”
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Law said P2P is currently facing a test and it’s crucial retail investors back the industry.
“It’s very important P2P investors calm down a little and accept they’re in a good place, getting good returns compared to some markets,” he said.
“Lenders should support the industry; if retail investors left the sector, platforms would either shut down or move over to institutional capital and that would be the sad ending of retail participation in P2P lending.
“So, by continuing to invest, investors are supporting the industry.
“The future is in the hands of the retail investor community. They need to ask themselves if they want to support this industry or risk a return to bank accounts and possibly soon, negative interest accounts.”