City watchdog tells consumers to think carefully before IFISA investing

THE FINANCIAL Conduct Authority said it has seen evidence that Innovative Finance ISAs (IFISA) are being promoted alongside cash ISAs and has urged consumers to “carefully consider where their money is being invested” before purchasing the “high risk” product.

“Investments held in IFISAs are high-risk with the money ultimately being invested in products like mini-bonds or P2P investments,” the City watchdog said on Monday.

“These types of investments may not be protected by the Financial Service Compensation Scheme so customers may lose the money invested or find it hard to get back.

“Anyone considering investing in an IFISA should carefully consider where their money is being invested before purchasing an IFISA.”

The regulator has previously flagged concerns over the way that P2P is marketed to consumers and has proposed categorisation or appropriateness tests, potentially limiting the sector to sophisticated investors.

The recent collapse of mini-bond provider London Capital & Finance has increased regulatory scrutiny of products marketed to retail investors. However, Orca Money’s chief executive Iain Niblock has argued that the firm’s collapse actually highlights the relative stability of P2P lending.

Read more: P2P sector queries data used to justify tabled investor restrictions

Do you work in the P2P industry and have a strong view on the FCA’s statement? Email editor-in-chief Suzie Neuwirth at [email protected].