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It’s hard to believe it’s June already, especially since the Goji team have been busy attending events around the country since the start of the year. We love events – they give us the opportunity to chat to advisers about the challenges they face and how we think Goji can help. We’ve had lots of interest and some great debates so far. For those of you that didn’t make it along to any of our round table discussions, we thought it might be useful to summarise some of the key outtakes:
I’d love to advise on this but how are you regulated?
The good news is that Goji operates under FCA regulations because we’re an appointed representative of Sapia Partners, and our Diversified Lending Bond is structured as an “AIF” and covered under “AIFM” fund regulations. We’re currently going through the process of getting directly authorised via the FCA (watch this space!) We also offer investors recourse to the FSCS and FOS.
Do I have the right regulatory permissions?
At our events, we’re often asked about permissions. We’re a non-mainstream investment, so we tend to be considered as an alternative. Many advisers don’t think they have the right permissions. However, the only regulatory permission you need to advise on our investments is “Advising on Investments – Retail (Investment)”. You don’t need any additional permission to the ones that enable you to undertake your core investment proposition, with no need to opt-in to advise on “Advising on P2P arrangements”.
Will your investments be covered by my PI insurance?
In our experience, once advisers have engaged with their PI insurers and explained the regulations that cover our structure and our classification as retail investment products, insurers tend to view us as any other widely used “alternative” investment (like VCTs and EIS) and they are comfortable.
How do I assess the risk on this type of product?
Direct Lending is a relatively new sector, so it doesn’t necessarily fit with the standard risk tools that you may be used to. But that doesn’t mean it can’t be quantified, and more importantly managed, because that’s what our Investment team do every day. We solve many of the issues around assessing risk for you; the research on the 100+ lending partners in the marketplace is conducted by us on your behalf as part of our investment process. In fact, we believe that there are at least 1,000 firms advising on Direct Lending, so a growing number are able to understand the risk and explain it satisfactorily to their clients.
Do you have any plans to move onto a platform?
We do understand that many advisers want to use the least number of platforms possible, and that there are frustrations when they can’t access investments through their chosen platform(s)in this area, but we’re in the same position as many other broadly accepted non-daily priced or dealing investments, including Investment Trusts, VCTs and EIS. We have our own, proprietary platform, that has been built using the latest technologies and frameworks so that is fit for purpose for a long time to come. It’s proven to be so capable in the sector that we’ve been able to license our technology to other product providers who are looking to move into this space.
Our platform enables advisers to place new business, either GIA or ISA (including transfers from S&S/cash ISA providers), create recommendations, provide valuations and allows clients to access their portfolio – including an overview of the underlying investment positions and exposures. We’re also working with businesses such as Intelliflo to provide integrated access to our platform via their back-office system.
I understand how Goji could meet my clients’ needs but I’m nervous that you haven’t yet been through a full investment cycle.
The classic roundtable question we get is from astute advisers questioning how these product will survive in the future, taking into account the lessons they’ve learned in the past. It’s been a long time since a significant market event has squeezed correlations as tightly as they were in 2008. However, the Direct Lending sector has been through this investment cycle, albeit it was in its infancy and much smaller than it is now. Zopa, one of the first platforms open to retail investment delivered 5% in 2008.
While we accept there’s no data on the effect of real-time market events on our portfolio, it’s worth bearing in mind that all our loans or loan parts are secured and/or insured; so we believe the sector is well placed for a future turn in the cycle. Equally, this is one of the positives of the sector – direct lending offers access to a lowly correlating asset class and offers investors diversification which is exactly what many investors need during times of stress.
Help me understand how this type of product could fit with my investment proposition overall?
Many advisers come to us trying to understand this critical question. Your central investment proposition might only allow liquid funds, but due to the low correlation to traditional asset classes, our products could be considered complementary to your core investment proposition. Our existing advisers find this is . Our existing advisers find this is particularly true true for clients who have surplus cash, who are looking for yield and who value (often via cash ISAs) who are looking for yield without taking on the market risk of traditional listed assets. They may also want income, and value the additional diversification. our products offer.
If you’d like to talk to us in more detail about any of these discussion points please do get in touch. We’ll be at other events throughout the year so why not look out for us and come and say hello?