The crowdfunding or Innovative Finance Isa will become a major new market and appeal to investors hunting for yield, investment fund manager Nicola Horlick has predicted.
Giving a keynote speech to delegates at the CISI Financial Planning Conference today, the CEO of Money&Co and CIO of Glentham Capital, said the ability of peer-to-peer or crowdfunding Isas to create an income stream could be particularly attractive to investors searching for yield.
Ms Horlick was speaking on crowdfunding opportunities for Financial Planners and their clients. She said the crowdfunding market had grown rapidly in recent years and was now worth £2bn in the UK. She predicted allowing the crowdfunding Isa would fuel growth and effectively open a new asset class.
There were risk with bad debts, she admitted, but said with potential tax free yields of 8% for investors, the crowdfunding Isa could open up a new opportunity and could help investors looking for a steady income stream. They may also be tradeable on platforms too, she said.
She said her firm concentrated more on peer-to-business lending rather than peer-to-peer lending.
Answering a question about risk for clients, she said: "It's not like buying stocks and shares, this is more of an alternative investment and you don't have the liquidity. The ISA thing brings it more into the mainstream and puts a different complexion on it. I think there will be a lot of activity in this market."
She added: "It's a bit more complicated and requires a bit more of an explanation. In terms of the overall risk I don't think it's very high as we're taking security (on the loans.)"
For planners considering these investments or loans for clients she added: "It is essential that the due diligence is done in the right way."
See live updates from the conference throughout the day on FP Today.
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