Our new guide to understanding peer-to-peer lending and its risks
Research from Yorkshire Building Society has highlighted a lack of understanding about peer-to-peer investment (P2P) and the potential risks it poses among consumers.
It has created a simple introductory guide for members and customers to find out more about this growing financial sector, which can be viewed or downloaded from the link at the bottom of this article.
Our survey* showed just 42% of people claim to be familiar with the term peer-to-peer lending and, of those, 60% were unaware that their money was not protected by the Financial Services Compensation Scheme (FSCS).
New ISA flexibility rules which come into effect in the Autumn are likely to lead to savers and investors taking further risks with their money, with about 10% of survey** respondents – equivalent to 1.8 million people – saying they will definitely take more risk while 40% say they will look at more risky investments depending on circumstances.
Financial advisers are concerned that the new saving and investing rules are likely to lead to more risk-taking without investors understanding the potential for losing money. Around 70% of advisers surveyed*** said they believe clients will look to riskier investments. Nearly half (45%) of advisers believe the new rules will increase interest in P2P lending.
Andy Caton, Executive Director at Yorkshire Building Society, said: “The Government is helping to encourage saving and investment with new rules and looks as if it will be successful with people keen to take advantage of increased flexibility and new tax-free allowances.
“Providers need to match that ambition by helping to encourage responsible saving and investing as there is a genuine threat that enthusiasm for saving and investing will be damaged if people are exposed to unnecessary risks they do not understand.
“Advice will be crucial in helping achieve success for the launch of new savings rules and we would urge anyone considering riskier investments such as P2P or equity-based investment to take independent financial advice before doing so.”
Click on the link below to access the new guide to understanding the P2P market.
Peer-to-peer lending explained
* Research was conducted on behalf of Yorkshire Building Society among a sample of 1,541 UK adults between January 12th and 16th 2015
** Research conducted online by Consumer Intelligence between 14th and 19th May 2015 among a representative sample of 1,020 UK adults
*** Research was conducted online via PollRight among a sample of 101 financial advisers between May 12th and 26th 2015