Hamstrung by rock-bottom interest rates for most of their adult lives, 4 per cent of 18-34-year-olds currently have money in the emergent peer to peer sector, compared to 1 per cent over-55s.
A third of millennials cite the ability to cut out banks as the sector’s biggest attraction, while 28 per cent like that they can lend directly to businesses. 23 per cent have had peer to peer recommended to them by a friend.
One of the key reasons for the peer to peer demographic split could be appetite for risk adjusted rate of return. Younger investors place much greater emphasis in earning high returns in exchange for greater risk, with one in five citing this as their primary motivation when investing, compared to only one in ten over-55s. The majority of over 55s are instead interested in stable returns and low volatility, compared to just a quarter of millennials.
The younger generation are also far more open to innovative new investments than their older counterparts. 51 per cent of 18-34 year-olds are willing to give new asset classes a try, more than twice as many as those aged 55 and over.
This openness is further evidenced by millennials’ propensity towards passion investments, with 61 per cent of 18-34-year-old investors having invested in niche asset classes such as cars and books compared to 26 per cent of over-55s.
The research comes as the latest figures show continued sector growth at the end of last year, with close to a £1billion of new loans in the final quarter of 2016, 64 per cent of which were loans to businesses.
Investment inflows are expected to surge in 2017 as the major peer to peer platforms receive authorisation for their Innovative Finance ISA propositions. According to the study, a third of those who already have a cash or stocks and shares ISA would welcome the opportunity to broaden their tax-free holdings into the new IFISA.
Kevin Caley, Founder and Chairman of ThinCats, commented: “The peer to peer sector has been growing in popularity since it first arrived in the UK a decade ago, but many people still consider it to be something of a novel investment. That perceived novelty is perhaps why it has proved so popular with younger investors, but that could soon be about to change.
“With the arrival of the IFISA, we expect to see many more seasoned investors branch out from their traditional ISA holdings, including those nearing retirement, for whom the fixed income nature of these investments is well suited to their income needs.”
