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Financial Advisers Steadily Switching On To P2P Lending
Yorkshire Building Society has conducted a poll of financial advisers.
It found “just” 18% of advisers have lent their own money in peer-to-peer lending or would consider doing so. Another 20% haven't decided yet.
It was just an online poll of 101 advisers, but these numbers don't surprise me. In my view, 18% seems about right at this relatively early stage in the industry, and the 20% who need more information or thinking time shows the shift that's likely to have been slowly occurring in advisers' minds.
Financial advisers must be extra sceptical
For both investors and financial advisers, the most sensible starting point for any investment is scepticism.
Particularly for financial advisers, the risks of getting it wrong by selecting P2P lending for clients far outweigh the benefits to them of getting it right.
By sticking to traditional investment funds, clients are likely to keep paying the adviser's fees without complaint. Hopefully, most of them will keep getting reasonably satisfactory results that justify those fees too.
If the adviser switches some of a client's funds to peer-to-peer lending and the switch turns out well, the client will keep paying the adviser's bills, but the adviser gains nothing.
But if a switch to P2P lending doesn't work, the client quickly finds another adviser.
In addition, a financial adviser has to be doubly, triply, quadruply sure before investing a client's money in a relatively new asset class. These busy people have a lot of extra reading to do before they can get that level of confidence.
Yes, the Yorkshire Building Society polled advisers about how they invest their own money, not clients' money. But a financial adviser who has justified not using P2P lending for his clients is also likely to make the same decision for his own money. Otherwise, he would have to accuse himself of double standards. (Or she/her/herself.)
The weakness of polls
If you read Citywire's section for advisers or other adviser websites, you frequently see, in the comments underneath articles, some very bitter arguments between financial advisers on every single subject imaginable, including investment strategy.
There is no one investment solution that they all agree with. Indeed, the mere fact that 100% of those polled didn't agree with each other shows there's plenty of room for opinion.
The best evidence of whether to invest in an asset class is probably solid figures that show the risk-reward balance for what it really is combined with solid, rational reasoning of our own. (Whether that's rational reasoning in how you select an investment or a financial adviser.)
But a poll of opinions really tells us nothing but other people's opinions.
If you're a financial adviser reading this, I'd really appreciate it if you got in touch with your own rational reasoning – both for or against peer-to-peer lending. Email us at firstname.lastname@example.org or write a comment below.