Although 73% of the Alternative Finance providers surveyed stated that they were either already marketing to financial advisers, or planned to do so in the future, the vast majority of advisers were still unaware of key industry developments. Only 7% of advisers surveyed realised that Alternative Finance is now regulated by the FCA, and only 13% were aware that some platforms used contingency funds to protect investors from losses.
Guy Tolhurst, Managing Director of Intelligent Partnership, commented:
"When we asked platforms what they thought the biggest barriers that prevent advisers from investing in the sector were, the vast majority said that it was a lack of education and awareness - so the alternative finance industry knows that they have to do much more to successfully reach out to the adviser community.”
With the new Innovative Finance ISA launching in April 2016, Alternative Finance is set to become increasingly popular among mainstream investors, with alternative finance expected to be worth £12.3 billion a year by 2020.
Intelligent Partnership's Daniel Kiernan commented:
“In the peer to peer lending sector, we know that retail investors are interested in the potential of truly uncorrelated, near-cash investments that will beat the returns they can get on bank deposits. Being able to hold these investments in an ISA will be the icing on the cake, and advisers will find more and more of their clients will be exploring this area.”
John Goodall of peer to peer lender Landbay added:
“Peer-to-peer lending has become an innovative and accepted alternative to traditional savings and investment products. Very soon it will cease to be viewed as alternative finance, but instead viewed as mainstream.”
However, despite advisers advising on an estimated £590 billion, over a quarter (27%) of alternative finance platforms have no plan in place to engage advisers.
Kiernan continued:
“For advisers, investing their clients’ money in individual opportunities, would be time consuming and difficult from a compliance perspective. At our recent alternative investment summit IFAs who wanted to invest in alternative finance were advised by industry experts such as Louise Beaumont of GLI Finance to start by investing in one of the specialist retail investment funds that have launched, or by using the platforms’ in-built automation to make investments according to their specified criteria.”
