What Peer to Peer Lenders Should Be Telling Their Investors – In Our Opinion...
(Capital at risk - Past performance does not guarantee future results)
When we speak to would-be investors about our P2P lending platform, there tend to be several questions that keep coming up (have a look at our FAQs page, here). Don’t be in the dark. The team here at easyMoney is always pleased to answer your queries, so don’t hesitate to get in touch if you’re not sure about anything.
And, it must be said: there IS no such thing as a stupid question. Forewarned is forearmed. We think that if you’re fully informed, you’re likely to be much more comfortable about investing with us.
Coupled with the fact that Innovative Finance Individual Savings Accounts (or IFISAs) are still relatively new in the marketplace – having been introduced in 2016/17 – this fresh, different way of investing will always need a full balanced explanation about how it works. As the name suggests, they’re innovative. And, they’re not cash savings accounts – an IFISA offers you ways to invest within a tax-free wrapper; something quite different from a “standard” ISA, with only the up-to-£20,000 tax-free allowance being the same.
So, it works both ways: we’ll always communicate clearly with you as part of the process.
Today’s blog is about the 7 key things that we think P2P lending platforms should be telling investors. In other words, the pro-active information should always go beyond the obvious. At easyMoney, our culture is about openness and transparency – we’ll tell you the positives and, to be fair, the potential negatives for you to make the right decisions.
The most obvious point is the first:
Explain Exactly How an IFISA Works
With an IFISA from easyMoney, you can invest up to £20,000 tax-free on our peer-to-peer lending platform. The money you invest can be as little as £100 with interest within the £20k allowance paid back to you on a monthly basis without you owing HMRC any tax.
Our focus is on property, and we will invest your money against UK-based property. In a nutshell, we will match you as a lender to an extremely carefully selected number of property investors, either looking for funds for bridging loans, property development projects, or both.
1) Be Clear About Likely Returns
According to Which?, the property sector is on the up ( https://www.which.co.uk/news/2021/07/how-will-the-coronavirus-affect-house-prices/); a robust construction industry is generally seen as having a positive, meaningful impact on the UK economy – which in turn provokes a healthy market for property development.
Whilst returns are never guaranteed (see our section on risk below), with easyMoney you could benefit from target rates of between 3% and 8%, depending on how much money you are willing to invest. We should also point out that your returns could reflect your attitude to risk, with higher-risk investments potentially offering higher rates, and vice versa.
With a cash ISA currently delivering returns of less than 1% on average, we’ll just leave this comparison here.
2) Be Clear About Who You Will be Lending To
With over 40 years of experience in real estate, our Chief Executive, Andrew de Candole has a wealth of in-depth experience and knowledge; his expertise has enabled him to gather a team of like-minded property experts ready to help potential investors like you to make the most of your funds.
The easyMoney team fully understands this complex area of business, and also collaborates closely with individuals and businesses looking to borrow for property projects. These borrowers are chosen with caution and care. The team’s expertise in this sector – and a strong awareness of the people who work within it – help us to create as much as we can a “perfect match” between borrower and lender.
We’re conservative lenders and mostly only deal with loans that have a low-risk grade.
3) Manage Your Client’s Expectations
We’ll talk you through the entire process, and make sure that that you’re aware of what’s likely to happen – and when.
For example, there may be a period of time between your money being held in cash and easyMoney distributing it to the loans on our platform. This is called cash drag and could happen when you place your first investment with us before loan allocation. So, it won’t be earning interest to start within this case.
We’ll explain all the administrative details, plus how you could have your money returned to you should you decide to invest elsewhere. And, of course, the risks involved with an IFISA. Talking of which…
4) Be Clear About Risk
Investments can never be risk-free.
The stock market can be volatile. Plus, you should never invest money if you can’t afford to lose it. We’re clear about this.
Our role is to communicate the risks before you invest so that you’re fully aware of all scenarios.
However, to reassure you: easyMoney has never made a loss on any of our loans. Equally, whilst your capital isn’t covered by the Financial Services Compensation Scheme, you should know that we have full authorisation to trade as a P2P platform from the Financial Conduct Authority.
5) Use Clear, Jargon-Free Communication
It stands to reason that a business called easyMoney should be easy to deal with. Not to mention a good communicator, with well-defined content on our website, and clear-cut, jargon-free language from everyone you come into contact with.
If we have to use “technical” terms, we’ll always explain them.
6) Be Honest and Transparent
We won’t shy away from the facts. You’ll know everything you need to know.
For instance, easyMoney can show you the performance on our loan books and how the money is spread across different types of assets. Overall, we feel that our message is incredibly positive, but we’ll always be upfront, open and honest in all our communication – whatever channel we are using.
We want to keep you as a customer, and of course - to recommend us to others.
We hope that you appreciate the easyMoney approach. Do get in touch for more information about our IFISAs and how they could work for you.
e-Money Capital Ltd trading as easyMoney is authorised and regulated by the FCA (FRN 231680). Instant access to your money can’t be guaranteed. The property industry is subject to market conditions and therefore your capital is at risk.
Peer-to-Peer Investments are not cash savings accounts so they are not covered by the Financial Services Compensation Scheme (FSCS). Past performance does not guarantee future results. Tax treatment is dependent on individual circumstances and subject to change.