UK peer-to-peer platform RateSetter has launched a new portal for wealth advisors after receiving the first ever risk-rating for a peer-to-peer lending platform.

UK peer-to-peer platform RateSetter has launched a new portal for wealth advisors after receiving the first ever risk-rating for a peer-to-peer lending platform.

RateSetter said in a statement that the new portal will allow IFAs to set up, manage and benchmark clients, set fees and get notified as client funds mature.

RateSetter became the first peer-to-peer company worldwide to be risk-rated by the research firm FE with a rating of 1 earlier this month, showing how crowdfunding and peer-to-peer websites are increasingly competing with more traditional banks.

Rhydian Lewis, chief executive and founder of RateSetter, said that the firm had seen a “real groundswell” in interest from IFAs, with clients increasingly asking them how peer-to-peer should sit within their investment portfolio.

“Our portal helps to support IFAs on the advice they provide to clients, including our FE risk score, statistics on the strength of our provision fund and how our interest rates are set. Peer-to-peer is a way of gaining better returns on savings via a product that is almost as secure as cash accounts,” said Lewis.

“Any advisor that describes themselves as whole-of-market and independent is doing their clients a disservice by not considering peer-to-peer as a part of a diversified portfolio,” he added.

Growth

In recent years, there has been a rapid growth in the number of crowd-funding and peer-to-peer websites as a result of traditional sources of loans and financing drying up since the financial crisis as banks seek to minimise risk. A recent survey by the UK's Peer-to-Peer Finance Association found that peer-to-peer lending at the end of the first quarter in 2014 hit £1.2 billion ($2 billion), up from £491 million at the end of the first quarter of 2013.

Within the crowdfunding space, the most prominent platform is Kickstarter, which brings people together to help fund creative projects. Those that pledge money on the platform tend to receive benefits or free samples in return for their cash, rather than share or money.

Peer-to-peer lending is different as it focuses on linking companies or individuals that want to borrow money with those that want to lend without using an official financial institution as an intermediary. As a result, peer-to-peer lenders can often offer more competitive borrowing and saving rates as there is no bank acting as a middleman.

Peer-to-peer lending and crowdfunding became regulated by the Financial Conduct Authority on 1 April 2014 with the aim of tightening up controls on the sector and to give investors clearer information about what they are investing in to prevent potential abuses.

However the new rules have come in for much criticism and have been viewed as draconian by many of the leading players in the industry.

Under the new rules crowdfunding platforms must give clear information on risks of lending to projects and can only be promoted to high net worth clients. Inexperienced investors must not commit more than 10 per cent of their net investible assets, excluding homes, pensions and life insurance.