How to be a Smarter Investor: Interview with Financial Thing
A familiar face for many savvy peer-to-peer investors, Financial Thing founder Laurence Samuels describes himself as having ‘a passion for helping others to figure out what took me years to learn’. So, when Laurence visited the Kuflink offices earlier this year, the team knew it was the perfect opportunity to share some of his insight and experience with our investors.
From the FCA review to the international market, Laurence spoke to us about key issues within the peer to peer space:
What are the top 3 things you look out for when researching a potential new platform?
LS: Do the returns offered equal the risk levels? Do the loans and lending products make sense? How is the company funded and how will it operate through the start-up period of losses? How and when will the company become profitable?
I look at the company’s Directors’ experience and the teams experience in regards to the products being offered. Do they have loan underwriting and default recovery experience?
In light of the recent FCA review, what are the key points for change you’d like to see within the P2P industry?
LS: I agree with many of the points inside the FCA review, particularly about risk levels being difficult to quantify and how provision funds provide investors with a false sense of security. One bad loan on a platform could wipe out an entire provision fund and then what?
I’d also like to see far more transparency. Easily downloadable total loan books showing what the spread between lender and borrower interest rates so the risks can be evaluated. Also, an emphasis on more detailed risk explanations. People need to understand that returns don’t always accurately portray the possible risks and that defaults will happen and are an unfortunate part of P2P and not to panic when they occur.
People must understand that default recovery can be a long process, especially when property is involved, and that capital losses are possible. I believe P2P platforms should be required to show loan spreads between lender and borrower so lenders can assess risk.
What do you think are the key difference between P2P investing in the UK and the US? Is there anything the UK industry could learn from the US?
LS: In the USA, the big P2P players in the market (Lending Club and Prosper) have had the benefit of being publicly traded so there tends to be a little more public awareness. Having said that, from my interactions with the general American public, P2P is still an unknown investment vehicle. Some of the high entry investment costs have created a difficult entry barrier for your average investor.
The UK is much more investor friendly with lower cost entry barriers. The main thing for the UK industry to learn is improved transparency. Some companies don’t have easily accessible loan books or statistics. The USA is regulated by the SEC which is quite stringent.
Why do you choose to invest in P2P, as opposed to more traditional options such as stocks and shares or property investing?
P2P makes up about 15% of my investment portfolio along with index trackers and property. I use P2P for diversification purposes to reduce risk. I believe P2P has a place in most investors portfolio’s but no one should ever place too much money into anyone sector.
What is the biggest or most important thing you’ve learned from your P2P investments so far?
Don’t chase the highest returns because even the best loans on paper can go bad so diversify, diversify, diversify. I’ve learned how important it is to spread investments across many loans and peer to peer companies.
Want to find out more about what happened when Financial Thing visited Kuflink HQ? Watch Laurence’s video of his time in Kent here!
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Top Tips for Affording University
Sending your children off to university is a proud moment for any parent, but the cost of helping them to study can be a real concern for families. Whilst it doesn’t necessarily have to cost you anything, most would like to be able to offer some financial support to survive, make the most of the opportunities that university offers and ease their transition into the adult world.
So, How Much Does University Cost?
Universities in the UK can charge up to £9,250 per year in tuition fees for an undergraduate degree; a staggering amount of money, but one that you don’t need to worry about just yet as it doesn’t need to be repaid until your child graduates and earns over the £25,000 threshold.
According to research by the Times, the total cost of accommodation, food and other essentials sits at £26,970 for standard 3-year course.
Teaching Your Child To Budget
The cost of day-to-day life for students can vary hugely; location, the type of degree and course are just some of the factors. Surrounded by new friends and more freedom than they’ve ever had before, it’s very easy to get caught up in a pattern of going out most nights and ending the evening with a takeaway or costly taxi home. Of course, nobody expects teenagers to miss out on the excitement of university, but it’s essential that you teach them how to manage their finances to avoid mid-term money worries.
The Essential University Survival Lessons
You can start with the basics – teaching them how to cook, setting up direct debits to make sure the rent is always covered and helping them to plan a monthly budget. Most students get freshers week out of the way and then set about finding a part-time job for some extra cash.
There are some great student discounts available with an NUS card, and through websites such as Unidays and Student Beans. These offers are a fantastic way of saving money on everything from broadband to burgers and in fact, if you’re willing to be flexible, there are very few things you can’t find a discount for!
How Much Can You Afford To Contribute?
Similarly, the key to working out how much you can afford to contribute lies in budgeting. You don’t have to plan drastic lifestyle changes or cutbacks, simply managing your money in a smarter way should be enough.
There are several ‘fast fixes’ to ensure you’re getting the most out of your money, from shopping around to find the best deals to re-assessing your savings approach. Spend a few hours going through your options and looking into new possibilities, such as short-term investments which could offer much higher returns than your savings account.
You may not earn thousands but with these simple tweaks, you should have more than enough spare cash to fill your car boot with goodies and head up or down to see your favourite student!
