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Post by SophieThing on Aug 12, 2015 9:32:07 GMT
The first topic for discussion is: P2P VS other forms of saving/investment
Main Question: What are your thoughts on investing on a peer-to-peer platform compared to other types of investment? (For example, bank, investing in property, other Alternative Finance such as Crowd Funding).
Sub questions: What other forms of saving/ investment do you use? Do you split your savings between different types of investment and if so, how? What advantages and disadvantages do you see between P2P and other forms of investment? Are you involved with Crowd Funding and how do you compare/perceive the risks/rewards VS P2P Lending?
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Post by SophieThing on Aug 12, 2015 9:47:36 GMT
OK I can see we have some activity on the forum, but no comments yet. I'll press ahead with the second question and leave it open in case anyone wants to respond to either question.
Second topic: General views on the peer-to-peer market.
Main question: What do you think of the market today and what is in store for the future of peer-to-peer lending?
Sub questions: How active are you now in the sector and how to you see your evolvement in the future? What are the biggest opportunities and threats to the P2P market? What advice would you give to someone about to start investing in P2P?
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bugs4me
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Post by bugs4me on Aug 12, 2015 9:49:21 GMT
Hi Sophie - let me start with your main question.
Personally I do not believe all P2P platforms are born equal but the introduction of FCA 'regulation' tends to give the impression that they are. I use the ' ' in regulation as the FCA tend to be reactive rather than pro-active in my experience. It's all very well to suddenly decide that a platform has not adhered to the rules and fine them accordingly but those fines tend to be remitted direct to the FCA and those directly affected are often left out of pocket.
So whilst FCA involvement is a good idea, in my case, I always do some DD on the individuals behind the platform. Apart from some of the headline grabbing rates on offer, you'd be surprised at the history of a few individuals behind the platform itself. Okay, past performance, etc, etc - but nonetheless these platforms I avoid irrespective as to the offers on the table.
P2P is a greater risk by it's nature rather than traditional savings institutions often paying derisory rates of return. Crowdfunding IMO is even riskier than normal P2P.
So apart from Z, RS and W, it's important to do as much DD as possible on what's being offered but do that after you have carried out DD on the platform itself. If you're not comfortable with either the platform or the 'offering' then walk away.
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SteveT
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Post by SteveT on Aug 12, 2015 9:58:22 GMT
Hi Sophie. I appreciate P2P as a diversified part of a wider investment portfolio rather than as an end in itself. Most of what I would previously have kept on deposit as "liquid funds" is currently held in various P2P platforms, ranging from what I perceive as lower risk (Landbay) to higher risk (ReBS) with various others in between. However the bulk of my "savings" assets remain in property and equities (ISA / SIPP). I'm not currently considering drawing down on those to increase my P2P.
P2P comes in all sorts of "flavours" so it's hard to generalise on its advantages / disadvantages versus other forms of investment. However the P2P platforms that attract my attention are those that offer a decent balance between rate of return, security and liquidity. If a platform falls down on one (eg. security) then it has to be advantaged in other (eg. liquidity). FC SME loans are the obvious example here; I only invest in them because I can hold them for a short period and then exit easily.
Other things that turn me away include high minimum investment thresholds, lengthy lock-ins, complex websites and poor administration, especially speed of deposits / withdrawals and the ability to track with confidence what I've bought and what I'm owed.
I've avoided any involvement with Crowd Funding as it seems too much like gambling to me (another thing I don't do). I'd rather keep my equity investments to quoted companies with audited accounts and the scrutiny of experts analysts.
Hope that helps a bit.
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webwiz
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Post by webwiz on Aug 12, 2015 9:59:37 GMT
P2P is obviously riskier than traditional FSCS backed schemes in one sense, ie one is more likely to lose money on any particular loan. However this may be offset by the higher returns available. E.G. 10 loans of £1K at 12% returns £1200pa so a total loss of one loan or a haircut of 25% on 4 loans would not be disastrous.
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Post by SophieThing on Aug 12, 2015 10:01:26 GMT
Thanks for your responses so far, very helpful. I'm going to press on with the questions.
Third topic: P2P platform comparison.
Main question: What are your thoughts on the current peer-to-peer platforms and their offerings?
Sub questions: What are the main similarities and differences in your view? What are the important factors you consider when deciding who to invest with? What are your selection criteria and what are the most/ least important factors?
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bugs4me
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Post by bugs4me on Aug 12, 2015 10:02:41 GMT
Me again - the P2P market is a tiny 'industry' in comparison to traditional lenders. IMO, I expect there will be some consolidation during the course of the next 12 months or so. More than one I believe will pull down the shutters and others may merge once the true costs of FCA compliance, general website running costs, etc determine that it's not as easy as it first appears.
Nonetheless, the P2P market in general has certainly gained the attention of more than a couple of institutions and whilst their funds may be attractive to the platform nonetheless they are a threat, not just to the platform itself but also to the private investor. Initially the statement is made that an institution being involved will not have any impact. Personally I don't believe that for one moment. If I was investing a few hundred thousand or maybe a couple of million pounds into a business I would expect preferential treatment and this I believe may already be the case. Are the institutions getting the cream? - leave to your own thoughts on that.
The other problem with institutional funding is that they are by nature a fickle bunch. So whilst the platform may gear up their operations to accommodate the influx of extra funding, those same institutions can just as easily move away. In doing so then the platform itself may be at risk unless they can trim costs quickly enough. But that's all crystal ball glazing on my part.
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bugs4me
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Post by bugs4me on Aug 12, 2015 10:10:07 GMT
Thanks for your responses so far, very helpful. I'm going to press on with the questions. Third topic: P2P platform comparison. Main question: What are your thoughts on the current peer-to-peer platforms and their offerings? Sub questions: What are the main similarities and differences in your view? What are the important factors you consider when deciding who to invest with? What are your selection criteria and what are the most/ least important factors? Main question - fall into two camps - good and not very good. The good platforms IMO are prepared to engage with their lenders whilst others choose to hide under a rock. I've got a stack of unanswered e-mails (or so it appears) that are unanswered. So on the surface the offerings may appear good I wouldn't trust them to manage a loan that I was engaged in. Sub question - there's more than one newish P2P that's offering what is already available from more established platforms. So I ask myself why would I invest via them. A new platform needs to offer something that's over and above what's already available. Hence maybe that's why MT and Ed's direct involvement that's made it fall into the 'over and above' category?
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webwiz
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Post by webwiz on Aug 12, 2015 10:11:59 GMT
My portfolio consists of Non p2p 60% p2p 40% split: MT 8% (trying to increase) Zopa 5% (reducing) RS 11% (This is instant access, rainy day money, only earning 3.9%) W 43% (Reducing as their rates have dropped) SS 18% Others 15%
I prefer asset backed loans. Barring fraud there should be no total loss. If LTVs are sensible haircuts should be few barring catastrophic property market collapse or some sort of financial armagedon.
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Post by SophieThing on Aug 12, 2015 10:14:16 GMT
Thanks for your responses. I have two more topics to cover.
Forth topic: Interest rates and service offering
Main question: How important are interest rates compared to other service factors?
Sub questions: What are your thoughts about the interest rates that you can earn from P2P lenders? How do you see the balance of risk/reward and how to do consider this? How do you value the service provided by platforms?
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SteveT
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Post by SteveT on Aug 12, 2015 10:17:18 GMT
What do you think of the market today and what is in store for the future of peer-to-peer lending?
Still in its infancy and inevitably going to expand enormously. I don't think it will be long before some of the "big names" in the established finance industry decide to grab a slice of the pie and either launch or (more likely) acquire a P2P arm. At the moment there is still virtual radio silence in the mass market media about P2P; try finding any mention of it in most weeks' Telegraph Money section (or any other mainstream paper) and you'll struggle, yet there are pages devoted to finding another 0.05% on your bank accounts or saving 0.1% on your ISA fees. Just wait until the finance media decide P2P is no longer "dirty" and "out there" and begin to expose their typical readers to the risk/return opportunities presented by P2P.
How active are you now in the sector and how to you see your evolvement in the future? What are the biggest opportunities and threats to the P2P market? What advice would you give to someone about to start investing in P2P?
Middling, but infinitely more active than I was a year ago (before I even looked into P2P). Biggest opportunity is the exponential growth potential, which is also the biggest risk, especially as the recent benign economic climate turns darker. Inevitably there will be some big, high profile losses ahead and also some platform failures / closures / rationalisation. How the industry deals with those will determine how P2P is perceived by the "masses" in future years. I think there is a collective need for the larger, established, more responsible P2P players to ensure their reputation isn't tarnished by problems caused by smaller, less well managed outfits (which seem to spring up daily)
Advice to a newbie:
1) Join this forum and absorb information like a sponge 2) Start at the lower risk end (eg. RS, W, Z, Landbay) and get to grips with that before venturing further up the risk/reward curve. 3) Don't put all your eggs in one basket; diversification is one of the few ways of managing risk that are entirely in your own control 4) Don't invest anything that you can't afford to lose, or at least see a substantial part of disappear and not have access to for a very long time
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bugs4me
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Post by bugs4me on Aug 12, 2015 10:20:35 GMT
Not an MBA myself Sophie as my background is commercial insurance and insurance contract law (which by it's nature is a minefield). You can do some DD yourself on the platforms to possibly help you with your MBA. It's time consuming but not difficult.
On another subject, I'm often confused with a platform giving a particular loan a risk rating. There are no set standards for these throughout the industry and often you will find a loan being rated as say risk band A, but when you do your own DD on the borrower they are anything but IMO. On a couple of occasions I've requested further details as to how a platform makes a risk band decision - needless to say that question has never been answered.
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webwiz
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Post by webwiz on Aug 12, 2015 10:20:39 GMT
You can find a lot of opinions on your questions on other boards on this forum. I realise that there's a lot to trawl through but many of us have done so, as the same user names cop up all over the place.
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bugs4me
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Post by bugs4me on Aug 12, 2015 10:24:53 GMT
Thanks for your responses. I have two more topics to cover. Forth topic: Interest rates and service offering
Main question: How important are interest rates compared to other service factors? Sub questions: What are your thoughts about the interest rates that you can earn from P2P lenders? How do you see the balance of risk/reward and how to do consider this? How do you value the service provided by platforms? Service factors take a higher priority than interest rates. Platforms that do not engage with their lenders are not worth a carrot in my book. There's one platform and I'm not going to mention any names but it appears in my eyes to be operating on the reputation of one individual. Good input from Stevet - Advice to a newbie:
1) Join this forum and absorb information like a sponge 2) Start at the lower risk end (eg. RS, W, Z, Landbay) and get to grips with that before venturing further up the risk/reward curve. 3) Don't put all your eggs in one basket; diversification is one of the few ways of managing risk that are entirely in your own control 4) Don't invest anything that you can't afford to lose, or at least see a substantial part of disappear and not have access to for a very long time
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webwiz
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Post by webwiz on Aug 12, 2015 10:25:34 GMT
Thanks for your responses. I have two more topics to cover. Forth topic: Interest rates and service offering
Main question: How important are interest rates compared to other service factors? Sub questions: What are your thoughts about the interest rates that you can earn from P2P lenders? How do you see the balance of risk/reward and how to do consider this? How do you value the service provided by platforms? What has the river got to do with it? (Only teasing) Interest rates are important but so are service levels and crucially loan availability. One thing that puzzles me is the failure of the market to balance supply and demand. SS and MT have a wall of money waiting for new loans, and much of this money would flow into available loans at a slightly lower rate if they were on offer.
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