ArchOver strengthens appropriateness test
ArchOver has strengthened its appropriateness test, adding some additional questions to the onboarding process to try and spot naïve investors.
Chief operating officer Ian Anderson said the peer-to-peer business lending platform will block investors’ applications if the data does not look good and potential customers will be asked to call the platform to verify they understand P2P investing.
He also said ArchOver will soon compile an “idiots guide” to describe what P2P is, how it works and the risks, which will be published on its website and emailed to new sign-ups.
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“We don’t believe very naïve retail investors should invest in P2P, they don’t understand the risk/rewards,” Anderson said.
“We’ve always looked to attract seasoned investors and/or sophisticated or high net worths. This extra work will go some way to ensure we don’t let novice investors onto the platform.
“It’s not so much success or fail. We try to filter out at registration those people who are not appropriate, we are currently making some changes that should help further. We then make everyone take the test, that is all about educating – so if you get a question wrong it will educate what is correct.”
The Financial Conduct Authority (FCA) published a consultation on strengthening financial promotion rules for high-risk investments, including P2P lending, which closed for feedback last week.
Within the document, the City watchdog outlined plans to strengthen appropriateness tests, for example by removing the ease of retakes, and improving risk warnings on ads.
Anderson said the FCA’s plans will have a “very small impact” and that education is “more important”.
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“They seem pretty set on going down this route, they think more barriers and calling something by a new name or putting up restrictions etc will help – it will have a very small impact,” he said.
“Will it really stop someone – I’m not so sure. It’s better to give them more information, more detail around what they are getting into.
“Education is more important– I believe that will have far more impact in ensuring naïve investors don’t invest.”