Retail investing is taking off around the world and it’s showing no sign of slowing. So why are more and more everyday investors are looking to diversify their portfolios into retail lending platforms? Let’s take a look at the benefits:
Access to the consumer credit market
Investing in consumer credit has historically been dependable because it’s tied to everyday and essential purchases, like vehicles, home repairs, and education.
This allows investors to achieve returns even when other investments, like shares or property, are on a decline. Previously, only banks and select institutional investors could invest in this asset class. Retail lending has now opened up access to everyday investors.
A regular source of fixed income
As a fixed-income asset, retail lending builds stability into an investment portfolio. Investors earn regular returns as borrowers make regular repayments on their loans.
Attractive, stable returns
Consumer loans have a solid track record of providing investors with attractive risk-adjusted returns.
Simple, digital experience
It’s easy to manage your investment activity online and on the go. Plenti goes a step further and has a mobile app to make investing quick and easy, no matter where you are.
Most Australian retail lending platforms provide investors with access to loans via a registered managed investment scheme. ASIC regulates these operators, requiring them to undergo regular audits, employ an external ‘Compliance Committee’, publish various reports and information (such as a Product Disclosure Statement) to investors so that they can make informed choices, and ensure that advertising is neither misleading nor deceptive.
Under Australia's financial services and credit laws, providers of marketplace lending products and related services generally need an Australian Financial Services (AFS) licence, and an Australian credit licence where the loans made through the platform are consumer loans (e.g. loans to individuals for domestic, personal or household purposes).
Essentially, this all means retail lending is well-regulated.
Of course, this doesn’t mean retail lending doesn’t carry risk – all investments do. Australian retail lending platforms are not covered by the Financial Claims Scheme (which protects sums of up to $250,000 that are deposited with an Australian bank).
However, some retail lending platforms, including Plenti, use a Provision Fund which, while not a guarantee, may help protect investors from losses.
Retail lending provides an attractive new investment option for everyday investors, including SMSF investors, who don’t want their money sitting in a low-yielding cash investment or want to avoid concentrating their investment portfolio on volatile shares.
Investors love retail lending because they get to earn attractive returns, with the added reliability of having a platform like Plenti do the hard work of judging creditworthiness and risk.
Borrowers love retail lending because it provides better interest rates and a simpler loan process.
It’s a win-win.
Think this sounds like the right fit for you? Find out if you’re eligible and how to get started today.