Rapid technological developments are making investing more accessible thereby changing the way in which people are investing their capital. As a result, traditional savings and investment models are being disrupted, and access to investment advice and opportunities
are opening up, putting power back into the hands of the investor.
Advances in technology have facilitated the rise of alternative finance. Alternative investment platforms essentially help people looking for an attractive rate in a low-interest environment target a potentially solid return without being exposed to the
volatility of the stock market. By cutting out the middleman and removing the overheads associated with traditional banks, alternative investment platforms are able to offer these sought-after favorable rates. Many of the largest participants delivered a FTSE
beating return in 2018, with many yielding around 4-5%. According to MoneyWise, in 2016 alone people in the UK invested £3 billion through lending platforms and total lending facilitated by platforms surpassed £10 billion during the third quarter of 2018.
Many potential investors, particularly younger cohorts, have access to disposable capital, but not the lump sums required to meet the minimum investment thresholds of the more traditional investment vehicles or the majority of IFAs. As some platforms have
an entry point of just £100, they open up access to investors that would otherwise find these thresholds prohibitive. In addition, such platforms are flexible; facilitating deposits in a matter of minutes and optimised for mobile use, yet still providing
the surety of regulated investment opportunities.
Property-backed investment platforms have proven particularly popular with investors because the loans are secured against bricks and mortar, reducing risk, yet delivering robust returns. A third of total loans organised in 2017 were property backed as
investors acknowledge potential stability represented by physical assets. The biggest growth has been in lending within the broader residential space, with demand for traditional buy-to-let assets cooling in response to changes to tax and stamp duty. In a
survey of almost 250 property professionals by accountants, RSM found that half thought that tax restrictions introduced over the past few years had affected their investment decisions and were considered “a barrier” to investment.
Many traditional buy-to-let investors are turning to property backed lending as an alternative way of building a balanced, diversified, property portfolio. In 2015, alternative investment products were approved for inclusion within the ISA wrapper, so interest
earned through eligible investment platforms can now be tax free, further incentivizing these investments.
Inevitably, traditional institutions are waking up to the lucrative opportunity of property-backed lending, resulting in partnerships between incumbents and newer, innovative players e.g. Portuguese bank Banco BNI Europa recently teamed up with crowdfunding
platform Fellow Finance to invest in the European SME loan market.
Despite this, it is unlikely that we will see a return to property investment as the preserve of HNW or institutional investors. The accessible property investment is here to stay.