In a policy statement, the FCA revealed that advisers had concerns about the regulator’s proposal to apply suitability requirements to firms that make personal recommendations in relation to P2P agreements.
The regulator said: “They argued that, as a result of the difficulty in being able to measure risks associated with P2P agreements, there would be limited interest from existing advisers in advising on P2P agreements, and that these were likely to remain ‘non-advised’ investments unless this situation changed.”
The FCA said it had attempted to address these concerns, stating: “Advisers must form their own opinion of the risk of any investment and advise their clients based on this opinion.
“If an adviser is unable to form an opinion based on the information available, then the correct response is not to advise the client to invest in that product.”
The FCA also said it would not oblige firms to have to consider P2P agreements when holding themselves out as independent – although this was something it would keep under review.
However, Paul Clampin, Chief Lending Officer at Landbay, believes advisers need to start brushing up on their knowledge of P2P lending.
“Few advisers are up to speed at this stage, with most putting it in the too hard/too small basket,” said Paul.
“We’d expect that the IF ISA will open up the industry to a broader audience, and in doing so, clients will start asking their advisers about it directly.”
Paul said he would like to see more education about P2P finance, adding: “As the industry gains mainstream traction it will become impossible for advisers to ignore if they want to deliver on the role of offering the best advice across the investment market.
“Avoiding peer-to-peer or, perhaps worse, providing inaccurate information on the sector is very possible if we aren’t helping to educate.
“Some advisers already know about peer-to-peer, but it’s important that they continue their CPD (continuing professional development).”
Aldwyn Boscawen, Marketing Manager at Wellesley & Co, agreed that more education was necessary, saying there should be a combined effort to teach advisers about the P2P market as a whole.
“Advisers should be acting in the best interests of clients and in doing so they should have an open view of P2P,” said Aldwyn.
“Whether they agree or not with P2P they should know enough about it to discount it.
“We can’t force them to advise it, all we can do is educate about the whole market and target this new area of distribution.”
Paul concluded by saying that full regulation was a step in the right direction for the P2P industry.
“The FCA’s stamp of approval will help to reassure advisers that client money is managed appropriately,” said Paul.
“Next, the platforms, regulators, comparators and media at large need to work hard to educate consumers (and their advisers) on whether or not peer-to-peer is right for them, bearing in mind that there are big differences between the debt that’s available across platforms.”
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