The recent increase in Innovative Finance ISA (IFISA) inflows is down to the power of word of mouth recommendations among the peer-to-peer investor community.
According to Narinder Khattoare, chief executive of Kuflink, the 2022/23 tax year is set to be a banner year for the IFISA tax wrapper and it’s all thanks to existing investors spreading the word.
“I think it’s happened because a few people have tested the waters, put money in for a year, and got the rewards at the end of it,” says Khattoare.
“And they’ve gone on to refer friends and family over to us. I know one individual who has referred 18 of his family members into us and they’ve all opened an IFISA account.”
This is a trend that Khattoare has noticed across the entire P2P industry. Recent research has found that IFISA returns have remained relatively stable over the past four years, meaning that experienced IFISA investors now have a track record that they can point towards when speaking to would-be investors.
“I think this will be a big year for the IFISA,” says Khattoare. “I mean, inflation is where it is at the moment, and people need to get a higher return on their money. People need to start actively looking to see where they can get a better return on their money, and the IFISA tax wrapper works!”
Kuflink’s IFISA is backed by properties where the platform has a charge registered on the freehold or long leasehold title. This means that if a loan goes into default, Kuflink will be able to realise the value of the underlying property to repay investors.
There are two IFISA options for Kuflink investors: an auto-invest IFISA which automatically diversifies investor funds across the number of loans in the pool; and the select invest wrapper, which allows investors to take a more hands on approach by choosing individual loans.
Returns range from five per cent to 7.44 per cent, depending on the type of investment chosen.
“I believe this year will be more attractive for IFISA investors,” says Khattoare. “The stock market has been very volatile and inflation is very high, and more people need to have their money working for them than ever before.
“It is a challenging time for investors, I myself have seen friends dabble in the crypto space where some have made some serious gains and others losses. I think people are happy to earn slightly less but would like some stability.
“Our product offering has seen great traction and think that will only grow due to the solid track record of our business.”
Kuflink has seen many transfers from Zopa’s now-defunct IFISA, and Khattoare expects to see some Funding Circle IFISA money start to trickle into the platform in the near future.
“We are very much open to transfers into our platform where investors can see good returns from a business that has traded through the pandemic without the need for outside investment,” he says.
“But as with any investments people should always seek some sort of advice either from a professional for a sophisticated investor.
“The risk is the key. From an investor’s point of view, they need to be aware of where their money is going, how secure it is and whether they can exit if needed.
“No investment is guaranteed but doing a little bit of research without being interest rate led will go a long way.”