Tag: Innovative Finance ISA

ArchOver launches Innovative Finance ISA to UK investors

Author
Angus Dent
Date

The ArchOver IFISA provides tax-free P2P lending service to increase investor ROI

London, UK – 25 May 2018 – ArchOver, the peer-to-peer (P2P) business lending platform, is helping British investors make the most of their annual tax-free allowance with the launch of its Innovative Finance ISA (IFISA). ArchOver’s IFISA service offers investors premium credit control and security, proven by ArchOver’s no-loss rate. It allows investors to invest directly in successful businesses, earning tax-free interest of up to 10% p.a. – far more than the average return on a cash ISA.

“We are excited to be launching our IFISA, a significant new string to our bow which will help our Lenders to really make the most of the attractive rates we have on offer”, said Ian Anderson, COO of ArchOver. “Our goal is always to work to our lenders’ and borrowers’ needs and provide them with the best service possible. Existing lenders will be able to plug straight into the IFISA without needing to re-register, and new lenders will find the platform simple and easy to use.

“This launch is an important part of the ArchOver story, as we continue to build an industry-leading investment platform that combines the best security with highly competitive interest rates.”

The UK government introduced the IFISA in April 2016. It allows investors to earn interest on peer-to-peer investments without having to pay tax on their earnings. According to recent research by ArchOver, the service is proving popular: over half (54%) of UK investors would put their cash into an IFISA if they had the money available, with nearly two thirds (63%) recognising that it would offer a higher return on their savings.

CEO Angus Dent commented: “There’s a strong market out there for the IFISA, and we’re excited to get stuck in. Potential investors do need to be aware that the IFISA doesn’t work like a cash ISA, – investment capital is always at risk – so it is essential that you work with a trusted and established partner.

“With our proven history of strong credit analysis and managing loans with extremely low default rates, we’re well placed to help people invest wisely and get the yield that they want on their cash.”

The ArchOver IFISA is now available to all existing and new lenders. Users will be able to invest their ISA allowance in all of the projects on the ArchOver platform, earning tax-free interest with a minimum investment of £1,000. Investors can choose from a range of security types depending on their needs, including investment models that provide protection measures like credit insurance, dispute resolution, controlled accounts and all-assets charges with Companies House.

The launch of the ArchOver IFISA comes after a strong twelve months for the company, including the launch of the P2P industry’s first R&D Advance loan for claims greater than £100,000. ArchOver is backed by the Hampden Group, and recently celebrated the milestone of £65 million total funding facilitated. The new service broadens its lender offering, cementing its position as the leading choice for investor security and control.

Majority of savers misunderstand benefits of IFISAs

Author
Angus Dent
Date

61% of UK savers acknowledge possibility of higher returns and better interest rates with Innovative Finance ISAs (“IFISA”), but majority still don’t understand the service

London, UK – 2 May 2018 – Over a third (36%) of UK savers would place their money in an IFISA if they had the money available. The question is, what does the industry need to do to gain the trust of the undecided two thirds?

While a large proportion acknowledge the prospect of higher returns (61%) alongside the allure of the tax-free wrapper and greater diversification, the IFISA is still a hard sell, according to research undertaken by P2P lending service ArchOver. In truth, the majority of UK savers (57%) still don’t fully understand the service. Unlike cash ISAs, money invested in an IFISA is not protected under the Financial Services Compensation Scheme. As such, savers need to be confident in the strength and stability of the underlying businesses they are investing in. They must seek out lending schemes that provide deep insight into borrowers as well as all robust processes and security.

IFISAs present a greater risk when compared to a standard cash ISA, but the potential reward is exponentially higher. ArchOver CEO Angus Dent explains, “IFISAs are fundamentally different to cash ISAs in the way they operate. Meeting investors’ expectations and making them feel secure at the same time will require ongoing education. Our research shows that nearly half (48%) of savers are nervous about losing their money, so the industry needs to communicate the benefits and safeguards clearly”.

“The IFISA gives you the freedom and flexibility to choose your own investment. Investors must use that power to choose an option which combines the best elements of P2P lending: thorough due diligence, rigorous lender security and favourable returns. They must do their research to gain insight into the companies they’re investing in and should not ignore the job of diversifying their portfolio to balance out their risk.”

Over a quarter (26%) of savers say they are reassured by regulatory oversight such as the Financial Conduct Authority’s (FCA) recent approval of a number of P2P providers, including ArchOver. Dent reassures concerned savers, saying that “although IFISAs have an associated risk like all investments, investors and savers can get a greater level comfort by choosing a P2P platform that carries out stringent due diligence and credit analysis of all potential borrowers”.

“Now is a crucial time for the sector to raise awareness around IFISAs and how they work. We must make sure that investors and savers have all the information they need when looking at IFISA options. Ultimately, we need to remember why P2P was created in the first place – to offer more choice and transparency when participating in project-by-project lending”, concludes Dent.

AIM, Peer-to-Peer Lending and the Innovative Finance ISA: predicting the Crowd’s next move

Author
Angus Dent
Date

I will start this blog with a question: what can the Government learn from the Alternative Investment Market’s evolution over the last twenty years when it comes to finalising the regulation for the incoming Innovative Finance Isa?

Let’s start by having a look at the Alternative Investment Market in its current state. AIM is the London Stock Exchange’s international market for smaller growing companies. A wide range of businesses including early stage, venture capital backed as well as more established companies join AIM seeking access to growth capital. It has helped over 3600 companies access finance and is the biggest market of its type in the world.

However, the demise of private client brokers has meant that the Crowd no longer can easily access Alternative Investment Market-listed companies. In their place, sophisticated investors have moved in, with IPO’s and listings funded by institutions. Subsequently, it has become a more established market containing companies that have outgrown the index. AIM can no longer provide private clients with an accessible route to investing in innovative SMEs that have the potential to grow.

However, Peer-to-Peer finance has afforded the Crowd another chance to invest their money in new ways, cutting out the Private Client Brokers of old. GLI Finance’s unsuccessful capital raise is a case in point: the Crowd has the power to do what it wants without the need of third party interference. The good news keeps on coming: the Innovative Finance ISA will bring even more individual wealth to the table and afford tax breaks on earnings made through Crowdlending.

And that is why the recent news limiting users of the new Innovative Finance ISA to only one platform is a hammer blow for both parties involved. Whilst it is possible to build a diversified investment portfolio on a single platform, part of the allure of Peer-to-Peer Lending has been the ability to choose to lend money to a range of companies across multiple platforms. At ArchOver, and I am sure this is the case at other platforms, we interested to find lenders who have lent over other platforms, and are therefore both wise to the general processes and are aware of the benefits and risks of lending money to UK SMEs. Taking away this variety will inhibit growth within the industry, and more importantly restrict the flow of private money to SMEs looking for alternative forms of low cost finance. The investor becomes exposed to more risk by lending to a P2P lender who could have overexposure to a specific market (Landbay and property being an obvious example), or uses a particular financial tool that only works for specific businesses (Market Invoice and invoice finance, for instance). And that’s not even considering the apocalypse if a P2P Lender actually failed.

The Government’s commitment to Peer to Peer Lending shouldn’t be questioned: the Isa is a huge vote of confidence for what is still a fledgling industry, and the regulation that has been introduced is certainly well-intentioned. But ensuring that investors have a greater choice when lending will encourage price competition and innovation and allow the small platforms to grow. There is a willingness on the Government’s behalf to continue to alter the regulation, which is a positive; obviously the sooner the better for platforms so as the technical side of things runs like clockwork come April.

The evolution of the Alternative Investment Market (whilst not necessarily a bad thing) should be seen as a cautionary tale for Alternative Finance. Peer-to-Peer Lending in particular is already in a state catharsis. Indeed, the reality that Goldman Sachs, the behemoth synonymous with banking opulence, has a presence in the Peer-to-Peer Lending sector in the US is evidence that history already may well be repeating itself. It is important for platforms to continue to welcome the Crowd alongside, and on the same terms as, the institutions, maintaining the democracy that saw alternative finance really take off in the first place.

Alternative Finance: the Outlook for 2016

Author
Angus Dent
Date

The Alternative Finance sector in general, and the P2P crowdlending platforms in particular, had everything going their way in 2015: low interest rates, traditional banks still dabbing their wounds, economy picking up, helpful new legislation (e.g. Innovative Finance ISA) from a newly-elected Tory Government, no major ‘car crashes’ in the industry and dramatically heightened interest from institutional investors. It is hardly surprising that the industry grew to a cumulative total of £4.6 billion lent (source: AIR) – indeed, it would have been more surprising if it hadn’t.

However, 2016 is likely to be a lot more challenging and will, I believe, start to “sort the men from the boys” – those who are in it for a quick opportunist buck and those who are in it for the longer haul. Interest rate increases cannot be far away now that America has made the first move in an upward direction. The big question is what impact is that likely to have on the savers who have been turning away from the banks and building societies in pursuit of a better return. In my opinion, this may affect consumers concerned about safety, but will have little effect on the outlook of HNW investors or institutions more used to balancing risk against reward.

Centre stage next year will be the FCA in its key role of granting authorisation to the scores of platforms that have applied – a vital step in stimulating the hugely influential IFA community to get behind P2P after the new Innovative ISA goes live in April 2016.

Finally, the scramble by the big institutional battalions to grab a piece of the Alternative Finance action is also set to gather pace. One of the final corporate actions of 2015 was the sudden departure of CEO Geoff Miller from GLI Finance, one of the great Altfi consolidators – a sure portent of things to come in an industry where the struggle for dominance has only just begun.

The other slightly disturbing question is whether in time, though not necessarily in 2016, the dis-intermediation brought about by the P2P revolution will fade away in the face of restored institutional dominance – bringing with it the need, once more, to pay the middle man at the expense of the ordinary punter. I do hope that does not come to pass. Then again, it is not always easy to turn away institutional money.