DIY Investor Magazine
|
June 2017
55
– a concept that retail and institutional investors alike
value.
The liability driven investing of pension funds is a best
practice example of objective driven investing, but are
direct retail investors using the same rigour? The FCA is
concerned that some retail investors do not, or are not
able to, make fully informed investment decisions that
help achieve their investment objectives. Put bluntly, are
retail investors skipping the diligence, disregarding the
asset allocation process and just chasing return?
As with all investing, it is about managing the risk
around this return; whilst some are wise to the different
business models and risk-adjusted returns available,
a review of investor forums shows that many investors
are searching for returns at the expense of a full
understanding.
Are investors getting the appropriate advice and
guidance to enable them to manage the potential pitfalls
and investing in line with a well considered risk appetite?
Certainly more can be done, but the direct lending
industry must work to enter traditional distribution
channels…they are not going to come to direct lending
and equally critical to financial planning best practice is
full and efficient tax planning.
But the challenge for the majority of retail investors
is that this can’t be done efficiently if the majority of
tax wrappers sit on ‘wrap’ platforms that can’t handle
unlisted products like P2P loans and debt based
securities. This is why Goji amongst others is working
hard to bring about acceptance by more mainstream
advice, guidance and investment channels to open up
new investor markets.
To be clear, Goji fully supports, and in fact does the ISA
administration to support, direct P2P distribution.
But with little infrastructure and support available for the
unconverted mainstream investor or adviser through
existing trusted distribution channels how can the sector
truly reach the mainstream?
Equally, how can investors truly optimise their direct
lending investments, as they can with other assets, if
they can’t invest in their traditional tax wrappers?
IS THE TIDE STARTING TO TURN IN THE ADVISED
MARKET?
As a new asset class, traditional distribution channels
(execution only or advised) have been treading carefully;
whilst institutional investors can pour resources into
research, other intermediaries are typically more
focused on distribution of well understood structure and
strategies.
There is also a question as to whether acceptance
of the sector has been slowed by both the arduous
FCA authorisation of many platforms and the poor
performance of the sector’s investment trusts many
of which are trading at discounts and undergoing
performance reviews. This is unfortunate as the FCA
process provides some assurance over the sector
and investment trusts are well understood structures
and widely accepted in tax wrappers and investment
platforms and therefore an easier way of of attracting
mainstream investors into the sector.
In light of the headwinds against adoption of the
sector it is of little surprise ‘direct to (P2P) platform’ has
struggled in traditional channels. But we believe this
is an opportunity to innovate so that we can embrace
the sector in a ‘purer’ form. The mark to market equity
wrapper of the investment trust added volatility and
correlation to what is otherwise a systemically isolated
financial instrument. But new distribution methods and
technologies are emerging that hope to preserve the
attractive underlying investment attributes of the assert
class whilst tapping into existing structures.
Goji is one of a breed of new managers who are
emerging with innovative new products that preserve
the uncorrelated, low volatility nature of the underlying
investments whilst affording eligibility for inclusions
within tax wrappers.
To find out more visit
THE DIRECT LENDING INDUSTRY MUST WORK TO
ENTER TRADITIONAL DISTRIBUTION CHANNELS’
