The word “disintermediation” is not very common in a financial advisor‘s vocabulary. Typically, financial advisors work with intermediaries like banks and other financial institutions when managing their client’s finances. So what happens when a financial phenomenon starts to take over the social media world that essentially removes the need for an intermediary? The loan and investment service known as peer-to-peer lending is changing the financial lending landscape in drastic new ways.
What if I told you that your clients could borrow money from a complete stranger, receive better interest rates than what most banks offer, and give the lender the opportunity to yield higher returns, all within a much shorter time period than the average loan and investment process? This is exactly what peer-to-peer lending does.
Peer-to-peer lending, also known as person to person lending and social lending, is a specific type of financial transaction that occurs between individuals without the intermediation of a traditional financial institution.
The removal of traditional financial institutions results in a drop in costs for servicing customers. It is important to point out, however, that as the peer-to-peer lending process develops, and more and more peer-to-peer companies that provide customer service, arbitration, product information and quality website management are created, we will simply see a reintermediation, much like the banks and traditional financial institutions we have been discussing. Furthermore, it is not crazy to foresee the reintermediation of peer-to-peer lending from financial advisors themselves-that is if advisors jump into the game and start playing for their clients.