pom
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Post by pom on Mar 3, 2017 14:08:30 GMT
Long term forum members may recall a discussion I had with a guy from Which that ended in him telling me I probably should discuss my p2p with my IFA...(and for those that do, yeah, with the benefit of a lot of hindsight I concede it probably wasn't meant to be as patronising as it felt at the time!) Anyway I finally spoke to him again this morning for a full status review after a nearly 2yr break during which we've only exchanged a few emails, stats & figures where the most he ever said was that they wouldn't currently recommend p2p. So not entirely surprising that once we finally spoke he did feel he had to mention how untested P2P really is, risks not fully known yet etc, which naturally I agreed with. But he also said something along the lines of that it actually fits quite well in the overall portfolio from a diversification point of view  (at which I thought too bloody right, you're already managing quite enough for me in S&S already thank you very much) And I guess I reassured him a bit about diversification levels within my pot. So it actually ended up being the easiest bit of our discussion - as for the rest, hmm, may be seeking some opinions in another thread later when I've fully digested. Anyway whilst I can't imagine he's going to suddenly start recommending p2p to his other clients, I like to think that if the subject did come up with someone else he'd perhaps say its not really something they recommend (because...) but that he has a client doing ok with it as part of a well diversified portfolio. Then again given the rather peculiar route by which I've ended up being a client I rather suspect I'm significantly different from his other clients so maybe it'll never come up anyway!! Guess I'll just have to make it my mission to continue challenging his worldview  |
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Post by charles on Mar 3, 2017 15:37:07 GMT
pom , it's quite simple actually. IFAs don't recommend P2P not because it's untested or risky, but because they can't squeeze any fees from these lean, disruptive P2P platforms, unlike the established asset managers or fund houses. IFAs are supposed to be independent - i.e. they get paid by you, their client, and therefore should work in your interests - but alas, it's simple Economics 101 (i.e. the principal - agent problem). Some of the dodgier IFAs may strike commission arrangements and keep the kickbacks for themselves, but even the prim & proper ones, who use these kickbacks to offset the fees you owe them, still prefer dealing with fund houses that have these commission rebate schemes because they know that it's much, much harder to get you to write a cheque for £5,000 for "advice rendered" than it is to just painlessly deduct it from the commission rebated.
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pom
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Post by pom on Mar 3, 2017 15:51:48 GMT
pom , it's quite simple actually. IFAs don't recommend P2P not because it's untested or risky, but because they can't squeeze any fees from these lean, disruptive P2P platforms, unlike the established asset managers or fund houses. IFAs are supposed to be independent - i.e. they get paid by you, their client, and therefore should work in your interests - but alas, it's simple Economics 101 (i.e. the principal - agent problem). Some of the dodgier IFAs may strike commission arrangements and keep the kickbacks for themselves, but even the prim & proper ones, who use these kickbacks to offset the fees you owe them, still prefer dealing with fund houses that have these commission rebate schemes because they know that it's much, much harder to get you to write a cheque for £5,000 for "advice rendered" than it is to just painlessly deduct it from the commission rebated. I should know, I used to work for a London-based IFA.  Full disclosure: I am co-founder of real estate crowdfunding platform Property Crowd I think we all know who you are now Charles But yeah none of what you say is surprising - my post was kinda in followup to a number of conversations about IFAs across different boards. Actually in my case my IFA has recommended a couple of things he's earned no kickbacks on, so when he said it's not something he'd would tend to recommend because of the unknowns I'm inclined to believe him. Also it's not like he's said "I'd advise you against it" - which he has about a few other things (Edit - and I've generally agreed with him)
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adrianc
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Post by adrianc on Mar 3, 2017 15:54:49 GMT
pom , it's quite simple actually. IFAs don't recommend P2P not because it's untested or risky, but because they can't squeeze any fees from these lean, disruptive P2P platforms, unlike the established asset managers or fund houses. That's certainly a (large) part of it, but there's also the question of liability and approval. I think an implicit nod, like pom got, is as close as you're going to get to acceptance, and even that only retrospectively.
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Post by charles on Mar 3, 2017 16:27:02 GMT
That's certainly a (large) part of it, but there's also the question of liability and approval. I think an implicit nod, like pom got, is as close as you're going to get to acceptance, and even that only retrospectively. That's absolutely true as well. Which is why I always wonder, "why do people pay IFAs thousands of pounds to help them toe the line of mediocre investment performance?" You know they're never going to recommend investing in anything punchy, will ask you to stick everything into a "well-diversified portfolio", and then charge you a hefty fee every year to "review your portfolio" but (almost) not change a thing. Speaking from first-hand experience here.
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pom
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Post by pom on Mar 3, 2017 17:01:21 GMT
That's certainly a (large) part of it, but there's also the question of liability and approval. I think an implicit nod, like pom got, is as close as you're going to get to acceptance, and even that only retrospectively. That's absolutely true as well. Which is why I always wonder, "why do people pay IFAs thousands of pounds to help them toe the line of mediocre investment performance?" You know they're never going to recommend investing in anything punchy, will ask you to stick everything into a "well-diversified portfolio", and then charge you a hefty fee every year to "review your portfolio" but (almost) not change a thing. Speaking from first-hand experience here. Yep pretty much...and I do wince a bit at the fees....but I didn't have time to take on everything myself (as a bit of background I'd just organised a 2nd funeral in 5months, was juggling all sorts of probate, trusts and tax stuff and really didn't have time to work out what to do for myself on top of all that ) but 2 years on I'm happy with the overall results and still can't quite be bothered to do it all myself, if I'd wanted to spend all my time engrossed in the stock market I wouldn't have studied engineering
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Steerpike
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Post by Steerpike on Mar 3, 2017 17:15:22 GMT
My IFA guided me through the stock market crash, achieving the same sort of losses as everyone else, 30% plus.
It occurred to me that I could lose that perfectly well on my own without paying someone else to do it for me, and since then I have done reasonably well without an expert making my decisions for me.
In my unqualified opinion, anyone that doesn't have much time to spare could simply invest in something like Vanguard Lifestrategy and read a few articles about passive investing.
Isn't LendingWell a P2P IFA product?
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pom
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Post by pom on Mar 3, 2017 17:49:06 GMT
My IFA guided me through the stock market crash, achieving the same sort of losses as everyone else, 30% plus. It occurred to me that I could lose that perfectly well on my own without paying someone else to do it for me, and since then I have done reasonably well without an expert making my decisions for me. In my unqualified opinion, anyone that doesn't have much time to spare could simply invest in something like Vanguard Lifestrategy and read a few articles about passive investing. Isn't LendingWell a P2P IFA product? I threw out a lot of paperwork so don't think I kept any over 7yrs old (my grandfather still had his tax returns from the 70s!! Which was eye opening for the tax rates, but seriously past any sensible use!!) but from memory I don't think the IFA did too badly during the last crash. But not relevant anyway, past performance etc. Anyway normally I'd totally agree with you about the DIY approach - saved myself a huge amount doing all the IHT probate etc stuff myself, not least as if I'd paid an expert a certain IHT loophole would probably not have occurred to them. But there's a time/scale thing. I could undoubtedly find a few "baskets" I'd be happy with with a bit of effort, but finding enough to satisfy my diversification preferences would rapidly take over my life. Which I want back thanks, before someone else goes and pops their clogs on me. So whilst I'll keep an increasingly close eye, for now I'm happy to leave things as they are and keep paying them.
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Post by charles on Mar 4, 2017 3:12:30 GMT
My IFA guided me through the stock market crash, achieving the same sort of losses as everyone else, 30% plus. It occurred to me that I could lose that perfectly well on my own without paying someone else to do it for me, and since then I have done reasonably well without an expert making my decisions for me. In my unqualified opinion, anyone that doesn't have much time to spare could simply invest in something like Vanguard Lifestrategy and read a few articles about passive investing. Isn't LendingWell a P2P IFA product? , you've hit the nail on the head there. My key insight, having spent all my professional career in financial services before moving into fintech and more specifically Property Crowd, was that like Warren Buffett says: a) the majority of people should probably embrace a low cost ETF like those from Vanguard (see his recent annual letter to shareholders here) because high fees eat away at everything, and b) for those that have the time/financial/mental resources to make their own investment decisions, they should absolutely do so, because only in yourself can you find 100% alignment of interest and accountability. and @new2p2p , yes, I would absolutely be "spilling the beans" even if I was still in the UK, because I see my work at Property Crowd as being part of that broader movement toward a new, more transparent, more empowered era of investing, which I truly believe in. pom & adrianc , The parallel I would draw here is with the travel industry and how low-cost carriers and tech platforms have revolutionised the way we do things. In the past, everyone went through travel agents, who took fat commissions to offer one-size-fit-all packages; today, there are still lots of people that go with the packaged tours, but for many of us, we now book our own flights and hotels using sites like skyscanner, trivago, expedia, etc... We get the best deal, and we get exactly what we want, and that's precisely what I see happening to the real estate investment industry as well, hence my involvement with Property Crowd.P.S. Sorry for the long reply - you might have noticed, I like writing letters. If you'd like to read more, please visit www.propertycrowd.com/blog/
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pikestaff
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Post by pikestaff on Mar 4, 2017 7:20:15 GMT
Steerpike , you've hit the nail on the head there. My key insight, having spent all my professional career in financial services before moving into fintech and more specifically Property Crowd, was that like Warren Buffett says: a) the majority of people should probably embrace a low cost ETF like those from Vanguard (see his recent annual letter to shareholders here) because high fees eat away at everything, and b) for those that have the time/financial/mental resources to make their own investment decisions, they should absolutely do so, because only in yourself can you find 100% alignment of interest and accountability. Indeed. I've never seen the point of paying someone to make mistakes that I'm perfectly capable of making myself.
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Liz
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Post by Liz on Mar 4, 2017 8:17:41 GMT
and @new2p2p , yes, I would absolutely be "spilling the beans" even if I was still in the UK, because I see my work at Property Crowd as being part of that broader movement toward a new, more transparent, more empowered era of investing, which I truly believe in. Is that a promise not to drop your rates when the ISA money floods in, to cash in?  I can guess the answer...market forces and all that. That's what they all say 
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Post by GSV3MIaC on Mar 4, 2017 12:13:50 GMT
Steerpike , you've hit the nail on the head there. My key insight, having spent all my professional career in financial services before moving into fintech and more specifically Property Crowd, was that like Warren Buffett says: a) the majority of people should probably embrace a low cost ETF like those from Vanguard (see his recent annual letter to shareholders here) because high fees eat away at everything, and b) for those that have the time/financial/mental resources to make their own investment decisions, they should absolutely do so, because only in yourself can you find 100% alignment of interest and accountability. Indeed. I've never seen the point of paying someone to make mistakes that I'm perfectly capable of making myself. When I quit my software management job I retrained/qualified as an IFA, which was probably cheaper than hiring one (iffin you don't have to pay the subs, indemnity insurance, and office expenses). Well it was for me, since my previous company funded my retraining anyway as part of my redundancy package (thanks, Texas Instruments). The client is a real PITA though. 8>.
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Post by charles on Mar 4, 2017 12:54:19 GMT
Is that a promise not to drop your rates when the ISA money floods in, to cash in? I can guess the answer...market forces and all that. That's what they all say , I can no more guarantee to maintain our high yields (e.g. 12% on our latest bond offering) than I can guarantee that Greece will pay back its debt to the EU. What I can promise, however, is that we will remain committed to offering institutional-grade investments and not compromise on asset quality (long term security) just for the sake of yield (short term gain). I think you'll find the yields on Property Crowd's real estate-backed bonds at the moment are very attractive, both on an absolute and a risk-adjusted basis, and we will continue to offer them at those levels for as long as it remains feasible to do so. I wrote a piece that was published on AltFi a few weeks ago, there were a couple of interesting charts, one of them showing how average yields across the P2P sector have converged. Have a read if you fancy. www.altfi.com/article/2645_alternative_finance_a_closer_look_at_p2pRegards, Charles
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Post by charles on Mar 5, 2017 5:41:54 GMT
"... they can't squeeze any fees from these lean, disruptive P2P platforms, unlike the established asset managers or fund houses." Before you get off your high horse, any chance you'd like to explain exactly what spread you are taking between borrower and lender rates on your loan? Plus what upfront or exit fees that are being taken from the borrower. Just so we can establish exactly how "lean" you really are and what percentage of the fully-loaded borrowers cost of funding we lenders will actually receive. Hi samford71 , the spread we take is negotiated on a deal-to-deal basis and I therefore don't have a precise figure to give you. But as we have recently re-launched, we are keeping that to a minimum in order to make our deals as attractive as possible to investors. As a guide, we made next to nothing on our first two deals. I think you'll find that the yields we offer on institutional grade, senior secured debt are as high as what some other platforms offer on more junior tranches and lower quality assets, which is extraordinary from a risk-adjusted return point of view. Part of that is down to superior deal sourcing, but part of that is also due to fees (or the lack thereof). Regards, Charles
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Post by charles on Mar 6, 2017 12:32:32 GMT
By the way, samford71 , have you taken a look at our Property Crowd platform? I'm always all ears for any feedback and constructive criticism, because we're always looking for ways we can improve. If you decide to give us a chance, we've got a bond that's closing soon - 8 March (Wednesday) - that has just £100k £80k to fund (of a total c.£850k fundraise). Regards, Charles |
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(at which I thought too bloody right, you're already managing quite enough for me in S&S already thank you very much) And I guess I reassured him a bit about diversification levels within my pot. So it actually ended up being the easiest bit of our discussion - as for the rest, hmm, may be seeking some opinions in another thread later when I've fully digested.
