Ask Our Panel
We’ve introduced this feature to enhance our communication with our investors and give you the opportunity to directly ask the questions that are important to you.
Our specially selected panel have been answering your questions and you can now view them below. As some of the questions were similar in content, we've edited them to avoid duplication of responses.
As 'Ask Our Panel' has proved popular, we will continue to run this feature in 2021. Look out for further updates in the New Year about when our panel will be taking more of your questions.
Thanks for all your questions so far.
Ask our panel Q&A 2
Q: Can you explain why the final maturity dates of loans continually drift by a day or three? Each time I check any of the loans, the final date is never the same as it was before
A: During the life of a loan, various in-life events can occur which are not possible to predict at the inception of the loan, such as the exact date of tranche drawdowns for a development loan or the provision of a period of forbearance or other restructure of capital or interest payments. These events require the loan ledger to be amended to take account of the event and can result in the final maturity date being adjusted by a day or so.
Q: I have funds in my Standard Access Account which I have been trying to withdraw in order to invest into my IFISA account and take advantage of the tax saving. I understand the rules regarding IFISA, but surely there must be a quicker way to sweep these funds to my IFISA?
A: Thank you for your question and we understand your frustration with the current process. As you have referenced there are HMRC rules that prevent us from transferring loan units into an IFISA-wrapped account. Historically, we have enjoyed high liquidity in the Access Accounts and the liquidation of loan units into cash and the subsequent reinvestment of that cash into IFISA-wrapped accounts was relatively instantaneous. Unfortunately, in current market conditions this is no longer the case at present.
We have explored in depth the possible options to improve the current process, but we have been unable to provide a compliant solution at present. This is largely because all liquidation of loan parts must pass through the Access Account Marketplace, so as to be available to any potential buyers on an open market. Therefore, whilst discounts are available, we cannot automatically withdraw your funds and reinvest them at par value without potentially losing money through the process.
We will continue to re-evaluate the situation and work on a viable solution to improve the process of transferring your investments in standard accounts to IFISA.
Q: In the past I was puzzled why you offered a bonus for depositing new money, rather than increase the deposit rate. I raised this with you and, perhaps predictably, I received an answer that swerved round the point I was making. Obviously, this trick enabled you to keep the borrowing rate down and/or your margin up. Now, I find myself asking a similar question: Why not increase the rate you are offering to investors on these Access Accounts? Once again, it seems that you prefer to keep the borrower rate down and/or your margin up, rather than 'normalise' the rate to a higher level.
A: Thank you for your question and I’m sorry if our response didn’t help to clarify your initial question. Increasing target interest rates is definitely something we would consider in the future and if you’ve been investing with us for a while you may recall we did this in 2018. We increased the target rate of the Quick Access and 30-Day Access Accounts from 3.75% and 4.25% to 4.1% and 5.1% p.a. respectively. We also introduced the 90 Day Access Account in February 2019 at an introductory rate of 5.75% p.a. These rates remained unchanged until July 2020, where as a result of the economic impact of the global pandemic, they were reduced with due consideration of FCA regulations that require advertised target rates to be achievable net of fees. We believe that these rates are both fair and achievable given the current economic climate, but we will continue to re-evaluate them in line with market conditions and FCA rules.
As well as increasing target interest rates we have also run a number of new investment incentives (for new and existing customers). Unlike rate increases, these promotions are paid directly from Assetz Capital’s monitoring income (our margin) and specifically designed to attract new investment to support new lending. These promotions have proved highly popular with new and existing investors alike and are typical of the peer-to-peer industry.
Our margin, also known as the monitoring fee on loans does not change as a result of increasing or decreasing the target interest rate on the Access Accounts (AAs). The AAs are made up of individual loans, each carrying their own manual lending interest rate paid to investors. As the AAs benefit from a separate discretionary provision fund, any difference between the capped target rate, lender fees and the manual lending rate is directed towards the provision fund. Therefore, the higher the target rate, the lower the provision fund contribution.
In reference to your point on the interest rate charged to borrowers, there are a number of factors which determine borrower pricing. We explain how we determine the interest rate charged to borrowers on our Credit Risk Assessment page on our website. On this page you can also see the monitoring fee we charge dependant on the loan type.
Q: Whilst I understand the necessity of the lender fee, I don't understand why it has to be taken from my IFISA account, thereby reducing the growth of my tax protected amount. Having the option of paying the fee from my Standard account would be much more preferable.
A: Thank you for your question and whilst we understand the benefits of making the most of your tax-free returns, it’s unfortunately not possible for us to collect the lender fee from standard accounts only. This is because Assetz Capital deducts the lender fees from the interest paid on the investment account in which the fees have been accrued and they are therefore charged separately for Standard and IFISA.
Q: Can you explain whether you see the discount becoming a permanent feature, or will you aim to match new lending to investor demand over the medium term, to bring the quick access account back to par? Also, would you ever consider making it a two-way secondary market and allow investors to sell at above par if investor demand outstripped supply?
A: The Access Account Marketplace and the discounting feature was implemented to give investors more control over their personal liquidity in these difficult market conditions. Over £25m of withdrawals have been speeded by this feature alone since the marketplace opened this year, as well as loan redemption cash being repaid to investors on top of this. Our ultimate goal is to see the return of the Access Accounts back to their normal operations, providing greater levels of liquidity at par value, without the need to offer discounts.
We haven’t made a final decision on whether or not the discounting feature will continue to be available to Access Account investors in Normal Market Conditions, or just when those stop from time to time. We hope that in time the discounting feature will no longer be required, as we return to Normal Market Conditions and trades revert back to par value and we may turn the feature off for significant periods if it is not required during future economic cycles.
Where there is demand to invest in retail loans, we aim to make sure there will be supply, so we do not see a need at present to facilitate a two-way market to allow investors to sell above par value and is therefore something we have decided not to implement at this time.
Q: I have Peer-to-Peer accounts with Assetz Capital, and a few other of the larger platforms. Why is the rate at which Assetz Capital is resolving withdrawal requests so much lower than your peer-to-peer competitors?
A: We cannot comment on the withdrawal process of specific platforms in comparison to Assetz Capital. However, we are aware that a number of peer-to-peer platforms (including some of the largest providers) are also reporting much slower than normal withdrawal speeds and have reduced, and in some cases withheld the interest paid as a result of the Coronavirus pandemic. Some platforms have also closed and are in run-off for their investment holdings and so that may also speed capital being returned to investors, or in some cases possibly slow it down instead. Each platform is different depending upon the situation.
It’s also important to note that whilst we introduced a temporary lender fee earlier in the year, a number of our competitors have always included lender fees as a permanent feature of their investment offering and is represented as an exit fee paid to new investors to permit other investors to sell their loans early.
With regards to our withdrawals process, it has always been primarily facilitated by other investor demand to buy your loan parts, earlier than loans naturally pay back. Withdrawal speeds are dependent on a degree of balance being restored between withdrawal requests and new funds being invested in the accounts. Presently, any withdrawal requests that you have for any Access Accounts that you are invested in, will have that request fulfilled from new investments by other investors (with new investment taking advantage of any discounts available in the market first) and by some of the loan redemption payments received from borrowers. In the meantime, we continue to pay the advertised target interest rates and expect that to continue based on what we know at present.
Like other investments in illiquid underlying assets, we certainly have slow withdrawals at present, but we continue to work hard in the background on new initiatives to improve the speed of withdrawals from the Access Accounts. We expect the accounts to be liquid for much of each economic cycle, but to see slowdowns with respect to withdrawal times in the more difficult period at the end of each cycle. We expect that liquidity will return in the future once investor appetite to deposit funds into the Access Accounts returns.
Q: Hopefully you would agree, investors in the Access Accounts are entitled to their money back and funds invested in, Quick 30- & 90-Day Access Accounts, should not be treated as had they been invested in perpetuity. Given the longest-term loan on the platform is 56 months; What is the absolute drop-dead date all redeemed capital will be returned to investors rather than used to fund further tranches?
A: Thank you for your question, unfortunately, we are unable to provide a ‘drop-dead’ date to your question. However, we can confirm the substantial drawdowns already paid from the Access Accounts and also the growth in the cash balances of the Access Accounts at present mean that all future tranche funding required is forecast to be covered by current cash balances held and we expect to see that forecast to be proven over coming months. This means that we can now consider accelerating withdrawals in the coming months.
Also, whilst we do agree that investors in the Access Accounts are not invested in perpetuity, we must stress that these accounts are not in ‘run off’ and are very much intended to recommence lending and continue as normal in the future and we have to consider the majority of investors who wish to remain invested.
Therefore, as things continue to normalise, the prospect of new lending can be reconsidered, which is highly desirable for the health of the Access Accounts and also contributions to their Provision Funds on an ongoing basis. This is important in order to keep the loan book fresh, maintain or improve diversification and ensure we are not in any kind of run off situation.
In the meantime, we have introduced the Access Account Marketplace which allows investors to apply a discount to their loan holdings to potentially speed up the withdrawal of their capital based on their personal liquidity needs.
Q: I have quite a large sum of money which I would like to invest but I want to be sure that I can withdraw it next April. Can you suggest how I can invest it to earn a reasonable return and be sure of withdrawing it in April? Last April I planned to withdraw some large sums from Assetz Capital for working capital for my business. I ended up using borrowed money.
A: Unfortunately, we cannot provide any form of investment advice. As with all investments into the Access Accounts, we cannot guarantee access times and liquidity is largely dependent on the demand from new investors. One of the reasons that we can offer higher interest rates than banks currently is due to us not providing guaranteed liquidity and also no guarantees on dates money can be withdrawn. You may wish to consider leaving money in a FSCS bank account for example if you have mandatory dates when you require the capital as we are an investment platform rather than a bank account and operate differently.
Q: When will Assetz Capital start to release loans for investment in the manual lending account?
A: We appreciate that many of our Manual Lending Account (MLA) investors are looking for new loans to invest in. Retail investment continues to be a core part of our platform and we endeavour to ensure that where there is demand for new loans, there will be supply.
I’m currently leading a project to explore ways of reinvigorating new loan flow into the MLA and looking at alternative ways in which investors can support the draw-down of new loans. I look forward to sharing our progress and detailing the opportunities available to MLA investors as soon as is practically possible.
Q: When Assetz Capital came up with the idea of the Marketplace, which allows Buy/Sell orders at a discount, did you have any contact with HMRC regarding how gains/losses would be treated for tax purposes? If so, would you be willing to make that HMRC information available to lenders?
A: Thank you for your question, unfortunately we have not had any contact with HMRC specifically relating to how gains and losses would be treated for tax purposes. We recommend that you speak to a professional tax adviser if you are unsure.
Q: Back in April we were told that a lender fee would be introduced and then reduced after about 3 months. Now there is no mention of the lender fees being reduced, so are the directors still taking a 50% pay cut? The business is obviously doing well under CBILS so why isn't the fee being reduced?
A: Whilst we have said that we will look to reduce the temporary lender fee as soon as is practically possible, we have never guaranteed a specific timeframe in which we would do this. The reduction and removal of the fee is very much something we are actively working towards as we look to restart new retail lending. We continue to review the situation actively and will communicate any updates as and when we have them.
It’s important to note that whilst our CBILS lending is a positive step for the stability of the Assetz Capital platform as a whole, the income generated via this type of lending is not related to the cost of monitoring and managing retail investments. We continue to have paused new retail lending in order to support withdrawal requests and existing loan commitments within the Access Accounts in particular and earn no fees from lending retail cash at present. Therefore, the speed of the removal of the lender fee is highly dependent on the ability to return to new retail lending, which will in turn create the income needed to facilitate its removal.
I can also confirm after taking several short-term cost saving decisions, which included temporary salary sacrifices by a number of our employees, we have since reverted back to paying 100% salaries. This decision has been made in line with hitting business objectives related to CBILS lending and to fairly compensate our team who are working tirelessly during these unprecedented times.
Q: When are Assetz Capital floating on the Stock Market?
A: This is a question asked of many leading FinTech companies and one that is hard to predict exactly. It depends on market perception of the company, the relative strength of the IPO market for new company listings, profitability or otherwise and also the state of readiness of a company to be listed. We continue to work towards this as a likely next major step financially and are therefore continuing to progress all factors under our control so that we are ready when the markets are ready in due course.
Q: Why not pay interest on Uninvested Funds? People would leave their money there longer even if the interest rate was only 2% as banks are paying zero at the moment. You could perhaps make an interest payment for each complete week or even daily as long as we had the certainty of immediate withdrawal as at present.
A: Thank you for your question. We cannot pay interest on uninvested funds held in your cash account because Assetz Capital is not a bank, and therefore we do not have the regulatory permissions (banking licence) to legally pay interest on deposits. As a peer-to-peer lender the loan interest we pay to investors is directly connected to the interest paid by the borrowers on the loans, whether that’s individually in the Manual Lending Account or as a portfolio in our automated accounts.
Q: Can you explain why you chosen RSM Restructuring Advisory LLP to handle your standby plan and Wind Down Arrangement?
A: Whilst our strategy is to maintain and grow our peer-to-peer lending platform, regulations require us to publish a ‘Standby Plan’ which is intended to ensure that even if we decide – or are obliged – to stop operating our peer-to-peer lending platform at any point in the future, the investments which have been made through it are not impacted.
Due to the nature and complexity of managing such a significant potential change to the platform, we have engaged the services of advisors (our current provider is RSM Restructuring Advisory LLP and its associated company Baker Tilly Creditor Services LLP (“RSM”)) to provide a “Standby Service”. Our Standby Service provider works with us continuously to ensure that they understand in detail how the platform is operating and how best to implement the above strategies should we decide at any point in the future that the Standby Plan may need to be implemented. In the event the Standby Plan is triggered, we would engage RSM to manage the implementation of the plan under terms we have already agreed with them.
When making the decision to choose a third party to manage the implementation of the plan, we were looking for a reputable and capable firm with the appropriate skill set. RSM have demonstrable experience of having worked an established Wind Down Arrangement with other platforms and also have a close working relationship with the regulators.
You can find more information about our Standby Plan and Wind Down Arrangement by clicking here.
Q: It would be interesting to know the financial position of the company with regards to profit and cashflow etc, basic information which would help us older generation in making decisions on whether to reduce risk in our portfolio or to give us confidence to stick with what we have invested with you.
A: We are currently in the process of filing our latest set of accounts for our financial year ending 31st March 2020, which will soon be available on Companies House. However, in the meantime we are happy to provide some further information on our financial position and we understand that a strong platform is one that investors will often seek to invest with.
The global economic impact of the Coronavirus Pandemic in March 2020 required prudent management of the company’s finances, which has been carried out by our experienced team. We have seen careful cash control, a recent equity fundraise via Seedrs using the government Future Fund initiative and finally the commencement of CBILS lending with profits and cash generation from that beginning to show through.
Whilst we have recorded a relatively small loss in our last financial year (to March 2020) and indeed since starting the business, we have made significant business investments in the past that created those losses. As a result of those investments since the company started in 2013, the close financial management during the pandemic and the strong return to lending under CBILS that we are now beginning to see, our financial position is looking healthy. We have managed the business through the first six months or so at around breakeven, a very good outcome given we paused lending for that period entirely.
We believe we were one of the first, if not the first, P2P lender to show a profit on its activities some years ago now and we believe that to be due to having a sustainable business model. We remain one of the very few P2P platforms of scale with a profit likely over the pandemic period, indeed many businesses would aspire to have such an outcome in these challenging times. One of the reasons for our financial strength is our economies of scale and tight financial management through a highly experienced management team.
- December 4, 2020