TruePillars believes it will provide an appealing alternative investment opportunity as it allows SMSFs with smaller balances to get in on the action of marketplace lending.
“Our legal structure is a fully compliant retail registered managed investment scheme, so when investors first visit they’re not hit up for sophisticated investor certificates, which I know is a problem for a large percentage of SMSFs who don’t qualify,” TruePillars founder and chief executive John Baini told selfmanagedsuper.
“We don’t have those restrictions – with the $50 minimum per loan, it makes it possible for a smaller SMSF who wants to build a diversified portfolio to have an entry point.
“It’s more than possible because of such a low entry point per loan.”
Baini said the loan opportunities were offered in a real-time marketplace.
“It functions similarly to eBay in that the investor comes along and says how much of the loan they want to fund, with the minimum being $50 per loan, and set the interest rate they’d like the business to pay,” he said.
“We charge a flat 2 per cent fee and the outcome of the returns so far has been around the 12 per cent point, but it’s still early days.
“We have all of our disclosure documents, PDSs (product disclosure statements), financial services guide and some of the content on the site, which means any SMSF can sign up.”
While TruePillars still encouraged sophisticated investors to participate in marketplace lending via its platform, there was an understanding that generally investors were comfortable to invest small amounts and then increase their commitments as more opportunities were presented, he noted.
“At the moment, we’ve got investors who are putting $50 or $100 in a loan and we’ve got others who are putting in thousands of dollars per loan, so it’s up to the investor to hopefully gradually increase as we’re able to deliver them more opportunities,” he said.
“We’re happy to cater to large and small investors.”
Investors are also provided with risk ratings as part of the firm’s proposition.
“To try to help the investor arbitrate between relative risk, we provide our own risk rating, which is one to five stars, and there’s a lot of information on the site that explains what gave them that rating and what it means, so the investor gets that from us, and there’s a view of risk provided independent of us,” he said.
“They can also see some summary information of the business itself, such as profit/loss and balance sheets. Anyone who signs up sees all of that.
“It’s almost incumbent on us to provide something like ratings to help investors line up the relative differences.”
TruePillars went live on 2 June after 18 months in development.
“The main time expense was getting that legal structure right and approved through ASIC and building the technology,” Baini added.
“We are now looking at creating liquidity in our loans.”