November 2019: Great Performance, Uncomfortable Surprises & New Challenges
Hi Savings4Freedom friends!
After a fantastic business trip to China last month, I’m back in Europe and ready to share a new monthly update. November 2019 was once more the best performing month for Savings4Freedom, but also a call to action on how to avoid the Chinese P2P collapse story with my own portfolio.
Kuetzal is in trouble due to management changes and multiple reports sharing concerns about the platform internal procedures and questioning the information presented by several borrowers that received loans through the platform.
FastInvest is under pressure to increase transparency & explain some prevalent rumors that are questioning the platform business.
Mintos is facing backlash for successive problems with it’s Loan Originators.
Regulatory Oversight Increases in the UK
The UK just implemented new Peer to Peer lending rules for the market in order to improve regulation over the industry and increase protections of individual investors, after multiple stories of P2P platforms failing to pay lenders back and going out of business.
Going forward, individual investors on will be classified within various categories including:
- Certified sophisticated investor – no restrictions on how much you can invest – based on past activity.
- Self-certified sophisticated investor
- You have made more than one investment in a P2P agreement or portfolio in the past 2 years
- You work, or have worked in the past 2 years, in a professional capacity relating to finance, resulting in an understanding of P2P
- You are currently, or have been in the past 2 years, a director of a company with an annual turnover of at least £1 million
- You are a member of a network or syndicate of business angels and have been so for at least the last 6 months
- High net worth investor – you earn more than £100,000 per year, or hold net assets of at least £250,000.
- Restricted investor – you may invest 10% of your net assets with certain exclusions
Other new rules that impact the platforms include:
- More explicit requirements to clarify what governance arrangements, systems, and controls platforms need to have in place to support the outcomes they advertise, with a particular focus on credit risk assessment, risk management, and fair valuation practices.
- Strengthening rules on plans for the wind-down of P2P platforms if they fail.
- Introducing a requirement that platforms assess investors’ knowledge and experience of P2P investments where no advice has been given to them.
- Setting out the minimum information that P2P platforms need to provide to investors.
- Applying the Mortgage and Home Finance Conduct of Business (MCOB) sourcebook and other Handbook requirements to
- P2P platforms that offer home finance products, where at least one of the investors is not an authorized home finance provider.
What are your thoughts on this approach? Which investor categories do you find yourself? Are you compliant? Let me know!
On the other end, China is ordering the total closure of the industry.
If you didn’t read my description of the rise and fall of the P2P Industry in China, check the story on the image above. In fact, at the end of November China announced that P2P lenders will have two years to exit the industry. Check the Reuters report here. This news is a direct answer from the Chinese central government to avoid new scandals and small savers demands for compensation for the loss of their money in the industry.
Defining plans for 2020
Taking into consideration the Chinese example and taking into analysis my own personal finances reality, I’m currently working on my P2P investment plans for 2020. Some ideas are already in place, others still need additional time to be implemented. As ever, only reality will define the course of the future, but I genuinely believe that if you guide yourself and your actions based on a strong set of P2P lending investment principles, you will be ready to answer any challenges and face any losses on your way.
In any case, I intend to share with you my plans in the December update.
But, without any further due, let’s check the Savings4Freedom returns!