News of the collapse of London Capital & Finance (LCF) with thousands of retail investors facing loses of 80% or more, is disappointing but not surprising to everyone. Disappointing because anything like this damages the public’s faith in financial services; but not surprising because no Independent Financial Adviser worth their salt would have exposed their client’s capital to the arrangement.
Promoted as a “Fixed Rate ISA” offering interest of 8% there were enough ‘red flags’ to alert any professional that it all may not be as secure as the many promotions would have had you believe. A quick look ‘under the bonnet’ and whilst we could never be sure, it was certainly not something we would invest our own money in, and as such, certainly not something we would let clients near.
We see many similar promotions across social media and other channels, for a variety of ‘interesting’ propositions, offering a range of tempting returns. Some are apparently outright fraud attempts and others are a little less decipherable in terms of their risks, for the advertised rewards. At Lowes, we start from the premise of being very skeptical and risk averse – with close to a fifty-year track record of successfully guiding our clients towards safe profits, we obviously don’t want to risk our reputation, let alone your money.
The Peer-2-Peer (P2P) investment sector is one that we have been following for well over a decade, without recommending a single client invest. Until now. Peer-to-Peer is way of using technology to match lenders with borrowers with the objective that both parties will receive a better deal by cutting out the traditional banks and building societies. The benefit to the lender is a potentially higher rate of return than would typically be achieved on a bank deposit and the benefit to the borrower is that the cost of borrowing can often be cheaper and the process, from application to receiving the funds, is quicker.
The first Peer-to-Peer online platform was launched in 2005 and there have been many since, some of which failed, losing investors capital. Some P2P arrangements will lend investors’ money for almost any purpose, some concentrate on lending only to businesses and most lend without obtaining any security to protect against the borrower defaulting. As you might expect the higher the risk of the borrowers defaulting, the higher the returns on offer.
As Independent Financial Advisers keen to find appropriate solutions for our clients, Lowes have been assessing the sector throughout its evolution and despite it becoming regulated by the Financial Conduct Authority in 2014, it was another five years before we became comfortable recommending any P2P solution. Our assessment of the sector has seen the company and directors review and test platforms by investing their own money and providing feedback to help improve the platform propositions, before exposing any client.
To date, there is only one P2P solution we are prepared to recommend to clients and then, only because of its unique features that serve to safeguard investors / lenders capital. These features include but are not limited to only making loans that are secured against UK property. That’s not to say that it is risk free, or that other P2P platforms are likely to fail, or lose investors capital, it’s just a case that we won’t be investing our money, or recommending clients do so, so it is a case of proceed at your own risk.
You may be one of those people who do not see value in employing the services of an Independent Financial Adviser, but we are sure that many of those London Capital & Finance investors may have just learned the hard way that the cost of not doing so, can be very considerably indeed.
Lowes provide unbiased advice to a wide range of people throughout the UK. We offer a free, no obligation, initial consultation so why not take an hour so to meet with one of our financial consultants to find out what we can do. We know thousands of people who are glad they did.
The value of investments and the income they produce can fall as well as rise. You may get back less than you invested.