Easymoney Innovative ISA Review
Description: Easymoney.com is a peer to peer (P2P) lending investment platform. It connects investors who have cash to property investors who need to borrow it. Easymoney.com acts as a middle man between the two parties, simplifying the administration process and connecting multiple groups together.
The Easymoney.com investment accounts offer an alternative form of investment that can offer attractive returns for high-net-worth investors. The Easy group of companies and their founder Stelios Haji-Ioannou have a long track record in the UK, so investors should expect a base level of management expertise and trustworthiness of the platform and that they have done their due diligence on the underlying investments.
- Attractive returns on larger sums, especially high net worth investors with over £1m.
- No fees to invest or withdraw funds.
- Innovative Finance ISA (IFISA) which means returns can be generated tax-free.
- Your capital is at risk and there is no protection from the Financial Services Compensation Scheme (FSCS).
- Returns on lower sums are not attractive given the investment risks (more details below).
Is there such a thing as easy money?
The FCA must have had an absolute fit when the approval for an innovative ISA named “easymoney” application was submitted. I’ve dealt with the FCA for 20 years. I’ve been a regulated individual, an anti-money laundering reporting office, a director, and an appointed representative, and have submitted direct regulation applications. And I can tell you one thing they don’t like is the suggestion that anything to do with money is easy. In particular, saying anything is easy when you can lose ALL your money.
For good reason too. There is a guy who drives around my area in a convertible Rolls Royce with a license plate that looks like Easy Money. In the US, Easy Money is a payday loan and check cashing company that has branches in strip malls. There is also a great book about crypto scams called Easy Money. You get the idea…
However, Easymoney is a great name, I wish I owned the domain, but then if I did, I wouldn’t be able to use it because it was trademarked in 1998 (when I was still at school). You can see here what else they’ve trademarked, including EASY EVERYTHING.
It’s remarkable they got it through the FCA’s approvals process, but they did, pre 2008, now they are a trading name of E-Money Capital, but kudos to them. After all “Easy” is a powerful brand and one that signifies value. Which is what investors want.
That familiar orange hue will do for you what others do, but just a bit cheaper. I just looked up an Easyjet flight for a weekend skiing from Friday to Sunday, it was £72, including carry-on luggage. That’s cheaper than the airport parking. It doesn’t matter that the plane will be full of drunks and that it leaves in the middle of the night. I once rented a Mercedes for about £10 a day from easycarhire on the Fulham Road (just round the corner from easymoney.com office actually), I couldn’t believe how cheap it was. I even stayed in an EasyHotel once, the floors were rubber and the bunk beds were nailed to the wall. But then again it was a stag do. So that’s fine, didn’t care, could have been anything.
Money is hard
But I think it’s different when it comes to money. When it comes to money I think you need a bit more than cheap and cheerful. Commission-free stock brokers are having problems at the moment because, even though they have millions of customers, none of them actually have that much money, so the brokers can’t generate much revenue from them.
So, who is Easymoney is aimed at? Definitely not for people that don’t have much money. They currently pay around 5-6% for smaller investors. By investors, I mean people that are giving easymoney their money to try and earn interest. Because easymoney is definitely an investment product, it’s not a savings product because it’s not protected by the FSCS which protects your money up to £85k if the savings account goes bust. Which says a lot about how confident the FCA is in innovative ISAs. Plus, you can get as good as 6% in a Hargreaves Lansdown Active Savings account or with a similar savings platform like Raisin.
So if you want the 10% interest rates you can’t get elsewhere, then you’ll need to invest more. So maybe that’s who easymoney.com is aimed at. The Rich. That’s ok, because the rich, still fly Easyjet. Afterall, the rich can only afford to renovate a villa in Ibiza if they don’t waste all their money on BA full fares.
Plus, the rich have more money, so it’s actually less risky to take more risk becuase, all your eggs are not in one basket. But, you can only invest up to £20,000 a year in an innovative ISA, so you actually don’t get tax breaks on the better interest rates. however, there is so much money slushing around the UK at the moment, and people need to invest it somewhere. So, it it’s only a small percentage of your overall portfolio and you want to lend it to some property developers, then easymoney provides a conduit for you to do that.
After all, banks make loads of money from lending it to people who may not pay it back at higher interest rates. So why shouldn’t you?
How do Easymoney.com peer-to-peer loans work?
When you invest your money with Easymoney.com, you’re taking part in an investment scheme known as peer to peer (or P2P) lending. These schemes connect borrowers looking for finance, with investors looking to generate returns.
In practice, it allows investors to act like a bank. When you take out a mortgage as a borrower, the bank lends you the money in exchange for interest on that borrowed money. In P2P lending, you are the one lending the money, and in the case of Easymoney.com, you’re lending that money to property developers to provide them with finance to help them complete their projects.
The interest the developers pay is passed on to the investor, with Easymoney.com charging a fee to the developer to facilitate the loan.
Property development backing
Current target returns range from 5.53% for investors with £100, up to 10% for investors with over £1m.
It is possible that you can lose all your money. However, Easymoney.com highlights the fact that none of their investors has ever made a loss. It’s important to keep in mind that this is a new product that was only launched in 2018. Before that easymoney.com was a financial comparison site (a bit like Good Money Guide).
Regardless, it is possible for investors to lose money with Easymoney.com and your capital is at risk if you choose to invest with them. The platform also does not offer FSCS protection.
The website states that there are no lock-in periods and that investors can withdraw their funds at any time. However, they also state that this is not a guarantee, and if the borrower or platform itself has limited cash on hand, it may take some time for investors to access their funds. Reviews are generally positive about the withdrawal process. However, it’s important to remember with peer-to-peer loans that things can change quickly. So just because there are no withdrawal issues, now, this can change in the future as the investments that your money is linked to are not liquid like stocks and shares that can be sold almost immediately. Property-backed investments can take a long time to come to fruition.
Generally speaking, both peer to peer platforms and underlying developers will keep cash on hand to meet redemptions and interest payments.
The target rates on offer from Easymoney.com are a little higher than what is available from instant access bank accounts, but it’s worth remembering that these are target rates of interest, not guaranteed rates, and the account is not covered by the FSCS like high street or online banks are.
5.53% is the current target rate for a £10,000 investment, which is not competitive with the interest available with short term fixed deposits (e.g. Beehive Money 9-month bond at 5.65%) or even instant access accounts (e.g. Coventry BS at 5.2%) which both offer FSCS protection.
Without a lock in period, banks or account providers need to have enough cash on hand to pay you back immediately. This limits what they can do with the money. With a lock in period, they have more options to invest or lend it on, meaning they can generate a bigger return for themselves and pass on more interest to you.
Current target rates of return are based on the sum invested and are as follows:
|Investment Amount||Target Return|
|£1 million+||Up to 10%|
Easymoney is not as safe as a cash ISA and your money is not protected by the FSCS, so you can lose your entire investment.
Yes, Easymoney.com offers access to both sides of a P2P lending arrangement, connecting investors with borrowers looking for bridging loans or development finance.
An IFISA is an account which allows individuals to invest in peer to peer lending, without having to pay any income or capital gains tax on returns.
It is also riskier than a Cash ISA. This is because a Cash ISA is low risk as it is covered by the security of the bank or financial institution it’s with, as well as having FSCS protection of up to £85,000 per bank group. An IFISA offers none of the same protection, and your capital is at risk