Investing headlines: peer-to-peer lenders beat the banks

P2P lenders beat the banks

Aussies are diverting millions of dollars away from savings accounts and term deposits into longer-term peer-to-peer investing, according to research from P2P lender RateSetter's investor base.

"The royal commission has shone a spotlight on our big banks and encouraged both borrowers and investors to look at alternatives," says RateSetter CEO Daniel Foggo.

"Our five-year market is proving extremely popular with all segments of our customer base but particularly mums and dads. Strong returns provide this group with a great alternative to bank offers, including savings accounts and term deposits."

Gen X is banking on the five-year market to deliver returns, says RateSetter, with 47% of them investing at an average rate of 9% over the past three months.

Millennials are most likely to focus on the shorter term, with 27% looking at the one-month market. The average rate received by investors in the one-month market over the past three months was 3.2%pa, says RateSetter. The average matched rates for one and three years were 4%pa and 7.6%pa respectively.

Of course, these rates are not guaranteed and can vary. You also need to remember your deposit isn't protected by the $250,000 federal government guarantee that is available for deposits in banks and other institutions.

SMSF is a family affair

If you have a self-managed super fund you may soon be able to add a few more people to your fund. The government has said it will expand the limit on the maximum number of members in SMSFs from four to six.

The SMSF Association has welcomed the change. CEO John Maroney says this will especially benefit family groups who want to include parents and their children (and potentially their children's spouses) in a single SMSF.

"Currently family groups may need to have multiple SMSFs to accommodate more than four members, so this proposal will allow a single SMSF for the group, bringing the benefits of reduced costs and greater scale," he says.

ETFs are in the box seat

Exchange traded funds will benefit from the revelations at the royal commission into financial services, predicts Arian Neiron, Van Eck's managing director and head of Asia Pacific.

"We expect a regulatory overhaul following Commissioner Hayne's findings, if not before then. Community expectations have changed.

"The industry is predicated on trust and a fiduciary obligation," he says. "We anticipate a high degree of financial product scepticism and our view is that ETFs, being low cost and transparent will enable advisers to earn their clients' trust."

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