If you were going to invest your life savings, your pension, your inheritance, you’d want to know it was relatively safe wouldn’t you?
Before you took the plunge, you would hope to weigh up the balance of risk versus return and make an educated and informed decision about where and with whom you invest? Do you play safe and potentially get a lower return or do you take a higher risk and reap the financial benefits faster?
This concept isn’t new of course – for centuries, people have taken perceived risks with their money. Some have struck gold, others have had their fingers burnt. And most have harvested returns somewhere in between!
In 2016, how do you make an informed choice and how important is transparency in this process?
We at CapitalStackers believe it is more important now than it has ever been. Investors are becoming more and more sophisticated and quite rightly, they demand transparency, whether investing £5,000 or £1 million.
Technology has also had a huge impact on the way people invest. Investors have direct and easy access to investor platforms and they should also have direct and easy access to any information necessary to weigh up risk and return. No matter how much you wish to invest, with whom or how experienced you are, transparency allows you to make a properly informed choice.
P2P lending and alternative finance companies are revolutionising the traditional banking and lending industries. According to the FCA, £2.7bn was invested on regulated crowdfunding platforms in 2015, up from £500m in 2013. But with change, often comes competition and uncertainty. Over the last few months there have been widespread calls for tougher regulation and control. Concerns predominantly focus on whether consumers understand the risk they are taking, especially those who are less experienced or knowledgeable.
There is also some confusion over the differences between the ‘pooled’ lending approach and direct peer-to-peer lending such as that arranged by CapitalStackers. With pooled lending, investors are provided with only part of the picture such as headline risk parameters and no detailed financial information about any of the borrowers or the deals. The upside is that risk is often spread across the loan whole portfolio, but investors are entirely dependent on the platform’s management.
Direct lending such as that arranged by CapitalStackers means absolute transparency and decision making independent of the platform management. Investors choose both the deal and the loan amount – and they have access to detailed information on the specific risk and returns.
Recent press headlines airing concerns with the alternative investment sector, such as those made by Lord Turner, are only a generalisation and don’t reflect the diversity within the P2P market. There is a vast difference between investing in a tech start-up through an equity crowdfunding platform and secured lending against bricks and mortar, for example. At CapitalStackers, we only arrange loans to experienced developers, many of whom have already raised part of the funding requirement through a mainstream bank and gone through their independent due diligence process, as well as our own stringent checks. No investment is without risk, but those made through CapitalStackers are carefully analysed, managed and transparent.
We have always been open to scrutiny and detailed information is provided to our investors up front providing the same level of clarity on the deal as the bank and the developer have in assessing its viability. This transparency is the foundation upon which CapitalStackers is based and the reason why our investors continue to re-invest.
John Thornley, MD of Fairhurst Estates, has committed funds to a variety of property backed investments over many years in the commercial and residential property sectors. As well as investing directly he now also invests through CapitalStackers. As an expert in this sector he was pleasantly surprised by the amount of detailed financial information provided on the platform. “I literally had no further questions which is unusual. All the information I needed to make an informed decision was provided up front”