With thousands of investors sweating on the £236m invested in London Capital & Finance’s doomed mini-bonds, and the Financial Conduct Authority issuing a warning about ‘high-risk’ Innovative Finance ISAs (IFISA), it would not have been totally surprising to hear that it had been a quiet run in to the end of the tax year for IFISA platforms.
Add to that Brexit uncertainty and global growth fears weighing on investor sentiment, and a duff ISA season could have been on the cards.
However, Peer2Peer Finance News (P2PFN) reports that there was a rise in IFISA inflows this ISA season, although investor demand may have been dampened by the bad publicity, resulting in what one industry source described as ‘muted growth’ at the tail-end of ISA season.
The last few days before the end of the tax year are vital for ISA inflows, with brokers and platforms traditionally experience an uplift in demand as those that have left things late rush to beat the deadline, and the early birds start tugging on worms just the other side.
However, despite the headwind of bad press, some P2P lenders have still reported substantial growth in IFISA inflows; RateSetter was one, reporting that it had now attracted £200m in subscriptions, bolstered by a good ISA season.
Industry body the Tax Incentivised Savings Association – TISA – produced figures showing that between 5th April 2018 and 5th March 2019, the value of IFISAs increased by more than 250% from £469m to £652m; the true figure will be higher still as it excludes April as it is calculated a month in arrears, and also Funding Circle, which is restricted in terms of reporting since its float in October 2018.
Accordingly, Ceri Williams, Downing’s head of digital distribution, told P2PFN that there could now be close to £1bn in IFISAs, noting that the average value of IFISA investments has remained fairly stable at around £12,000 to £13,000 over the past year, he said: ‘This is interesting as it just bumps along at a very consistent rate,’ adding it is a high proportion if someone has the whole £20,000 ISA allowance to invest.
The number of IFISA accounts has risen steadily over the last year from 18,885 to 51,371; Williams said that Downing’s IFISA inflows were in line with expectations, although: ‘We’d like a little bit more. The market is getting very competitive with 91 IFISAs now available, so it is a congested space that everyone wants to go after,’ he said.
Referencing the recent bad press, Williams added: ‘There is a popular misconception that all providers are in the same bucket and tarnished with the same brush, which doesn’t help in a competitive environment.’