oxdoc
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Post by oxdoc on Apr 2, 2018 8:55:10 GMT
I was wondering is the £5,000 minimum investment expected to be in place for a long time? I could potentially see myself investing more than that if I trusted Bondmason, but I'm not going to trust it without testing it with a smaller amount first. So I'm not going to invest with that threshold in place (unless I became a lot richer!). It would be useful to know if the threshold may be reduced in the not-too-distant future so I still consider it worth checking up on BM.
Another issue with a high threshold is that with the time taken to invest apparently being a significant issue, I would prefer to build up my investment gradually in order to avoid having large amounts of idle cash.
If others think like me, then I would expect investments to be reduced. Is the minimum investment so much higher than for other platforms because BM cannot invest that much cash right now, or are the admin overheads not considered worth it for smaller amounts (in which case, why can other platforms handle smaller investors and not BM?)? Or is there another reason?
Is there a potential hybrid option where people can have a lower threshold for a couple of years whilst they try BM out and then build up their investment?
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Post by stevefindlay on Apr 2, 2018 11:45:40 GMT
Thank you for your question.
We will be introducing some fixed term bonds in the coming months, which will have a smaller initial investment amount.
The £5K minimum for the current product isn't likely to change any time soon I'm afraid.
The rationale for the minimum threshold is to ensure to we can service clients effectively. Too many small(er) clients meant that we couldn't offer everyone a sustainable approach of direct interaction with the the team here, which is important to us.
The bonds will be a much simpler product, and we anticipate will require less client maintenance per £ invested.
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Post by bobthebuilder on Apr 2, 2018 19:08:08 GMT
oxdoc Possibly worth mentioning also that other platforms have an interest margin (the difference between what they receive from borrowers versus what they pay lenders) that funds their admin costs. BM don't have that because they invest in the loans on other platforms rather than originating them themselves, which is why they have a fee to investors and a fairly high minimum. The fee used to be 1% p.a. and I'm afraid that when it went up to 1.5% p.a. I cancelled plans to add to my investment.
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Post by stevefindlay on Apr 2, 2018 20:35:18 GMT
oxdoc Possibly worth mentioning also that other platforms have an interest margin (the difference between what they receive from borrowers versus what they pay lenders) that funds their admin costs. BM don't have that because they invest in the loans on other platforms rather than originating them themselves, which is why they have a fee to investors and a fairly high minimum. The fee used to be 1% p.a. and I'm afraid that when it went up to 1.5% p.a. I cancelled plans to add to my investment. Also, probably worth noting: (1) Over half of underlying loans on BondMason are sourced from non-P2P platforms, typically at rates which are better than those available on P2P platforms for comparable loans (even accounting for our fee). (2) Our fee is significantly less than P2P platforms - e.g. Ratesetter at 2.5-4%+, LfSS at 4-6%+ etc, etc.
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oxdoc
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Post by oxdoc on Apr 2, 2018 21:20:27 GMT
OK, fair enough then if a lower threshold is not viable.
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hantsowl
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Post by hantsowl on Apr 2, 2018 23:32:30 GMT
oxdoc Possibly worth mentioning also that other platforms have an interest margin (the difference between what they receive from borrowers versus what they pay lenders) that funds their admin costs. BM don't have that because they invest in the loans on other platforms rather than originating them themselves, which is why they have a fee to investors and a fairly high minimum. The fee used to be 1% p.a. and I'm afraid that when it went up to 1.5% p.a. I cancelled plans to add to my investment. Also, probably worth noting: (1) Over half of underlying loans on BondMason are sourced from non-P2P platforms, typically at rates which are better than those available on P2P platforms for comparable loans (even accounting for our fee). (2) Our fee is significantly less than P2P platforms - e.g. Ratesetter at 2.5-4%+, LfSS at 4-6%+ etc, etc. Sorry, but I am a little confused with (2) above. LfSS at 4-6% ?? I have invested with LfSS for around 2 years and received around 12% interest (with no defaults) and paid NO fees. Maybe I have misunderstood the point here, but where does the 4-6% come from?
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Greenwood2
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Post by Greenwood2 on Apr 3, 2018 7:05:14 GMT
Ratesetters haven't charged lender fees for years.
There is a fee for selling loans (if you want to liquidate quickly) but no lending fees.
None of the other ones I use charge a lender fee, either.
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garfield
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Post by garfield on Apr 3, 2018 8:40:03 GMT
The point here is that all platforms have fees. Often they are folded into the difference between what a borrower pays and what rate lenders get. BM are more transparent than this. I also feel they have a good handle on what they actually need to charge to keep the platform running sustainably.
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Greenwood2
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Post by Greenwood2 on Apr 3, 2018 14:31:28 GMT
The problem with the BM fee is that lenders pay tax before the fee is deducted. Many of the other platforms have changed the way fees are charged so that they are on the borrower side or deducted before the lender receives the interest, so that lenders are not charged tax on the fees.
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Post by stevefindlay on Apr 3, 2018 15:21:37 GMT
Ratesetters haven't charged lender fees for years. There is a fee for selling loans (if you want to liquidate quickly) but no lending fees. None of the other ones I use charge a lender fee, either. Their fees are the difference between borrower rates and lender rates. The may not charge you directly, but it is akin to 'robbing Peter to pay Paul'.
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Post by stevefindlay on Apr 3, 2018 15:23:47 GMT
The problem with the BM fee is that lenders pay tax before the fee is deducted. Many of the other platforms have changed the way fees are charged so that they are on the borrower side or deducted before the lender receives the interest, so that lenders are not charged tax on the fees. This is a moot point if: (1) you are able to utilise your £500-£1,000 tax free interest allowance; or (2) structure your tax affairs, e.g. through a personal investment company - which if you are earning more than £1,000 in interest or a higher rate tax payer, may well be doing; or (3) subscribe to our upcoming IF ISA product...
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Greenwood2
Member of DD Central
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Post by Greenwood2 on Apr 3, 2018 15:37:29 GMT
The problem with the BM fee is that lenders pay tax before the fee is deducted. Many of the other platforms have changed the way fees are charged so that they are on the borrower side or deducted before the lender receives the interest, so that lenders are not charged tax on the fees. This is a moot point if: (1) you are able to utilise your £500-£1,000 tax free interest allowance; or (2) structure your tax affairs, e.g. through a personal investment company - which if you are earning more than £1,000 in interest or a higher rate tax payer, may well be doing; or (3) subscribe to our upcoming IF ISA product... 1) Used up 2) A company has it's own problems, paperwork and costs. And I thought if you set up a company specifically to lend money you then need all the associated permissions, but if you have a 'proper' company already you can use it for lending as a sideline. It all seems a bit fraught to me. 3) May do.
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Post by stevefindlay on Apr 3, 2018 15:58:07 GMT
This is a moot point if: (1) you are able to utilise your £500-£1,000 tax free interest allowance; or (2) structure your tax affairs, e.g. through a personal investment company - which if you are earning more than £1,000 in interest or a higher rate tax payer, may well be doing; or (3) subscribe to our upcoming IF ISA product... 1) Used up 2) A company has it's own problems, paperwork and costs. And I thought if you set up a company specifically to lend money you then need all the associated permissions, but if you have a 'proper' company already you can use it for lending as a sideline. It all seems a bit fraught to me. 3) May do. Re (2) - BM shouldn't be beaten up in both directions... If your view (or the view of your advisers) is that BM is not classified as lending (and fee not tax deductible for the individual) then for consistency it should not be classified as lending for the purposes of Corporate clients using BM for regulatory purposes; and so the 'Lending By Way Of Business' for regulatory purposes is not an issue. Similar to the analysis for Corporate Clients investing in LendInvest / MarketInvoice / Sancus opportunities etc (but clearly the company in question would need to consider if they are a CIS - i.e. how many shareholders, how is it funded and operated, etc). From a tax perspective, structuring through a corporate means you could benefit from: - deductibility of costs against income (including BM fee) - £5k / £2k tax-free dividend allowance - you / your spouse can lend to the company to take advantage of £500/£1,000 interest allowance - employ your partner / children etc - if they are providing a role - to take advantage of their tax free thresholds - trusts / offshore / etc... None of this is advice or a recommendation - just trying to highlight that tax isn't a simple one-size-fits-all for everyone. Every person / corporate needs to consider their own affairs in their own context.
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beh
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Post by beh on Apr 3, 2018 16:15:34 GMT
(3) subscribe to our upcoming IF ISA product... Roughly how soon do you expect to be offering this?
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Greenwood2
Member of DD Central
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Post by Greenwood2 on Apr 3, 2018 16:18:20 GMT
1) Used up 2) A company has it's own problems, paperwork and costs. And I thought if you set up a company specifically to lend money you then need all the associated permissions, but if you have a 'proper' company already you can use it for lending as a sideline. It all seems a bit fraught to me. 3) May do. Re (2) - BM shouldn't be beaten up in both directions... If your view (or the view of your advisers) is that BM is not classified as lending (and fee not tax deductible for the individual) then for consistency it should not be classified as lending for the purposes of Corporate clients using BM for regulatory purposes; and so the 'Lending By Way Of Business' for regulatory purposes is not an issue. Similar to the analysis for Corporate Clients investing in LendInvest / MarketInvoice / Sancus opportunities etc (but clearly the company in question would need to consider if they are a CIS - i.e. how many shareholders, how is it funded and operated, etc). From a tax perspective, structuring through a corporate means you could benefit from: - deductibility of costs against income (including BM fee) - £5k / £2k tax-free dividend allowance - you / your spouse can lend to the company to take advantage of £500/£1,000 interest allowance - employ your partner / children etc - if they are providing a role - to take advantage of their tax free thresholds - trusts / offshore / etc... None of this is advice or a recommendation - just trying to highlight that tax isn't a simple one-size-fits-all for everyone. Every person / corporate needs to consider their own affairs in their own context. Touche. (Can't do an accent off hand). Touché. Thanks to oldgrumpy
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