Wellesley & Co Review
** Wellesley & Co review updated June 30th 2017 **
Wellesley & Co is a company once considered by many as one of the premier peer to peer investment choices. Unfortunately they reduced interest rate returns and ceased offering a peer to peer product, so I no longer consider Wellesley as a viable investment choice.
Wellesley & Co has recently announced sweeping changes to its business in order to comply with FCA regulation. Here’s a summary of the changes:
- No new peer to peer lending investments will be accepted until Q3 of 2017. All current p2p loans will remain in tact but once matured, payments will not be re-investable into p2p loans but can be reinvested into Mini Bonds.
- Upon relaunch, peer to peer lending payments will be made at the loans maturity rather than monthly.
- Loan agreements will be directly with borrowers rather than with Wellesley & Co
- The provision fund will be eliminated
My current rate of return: 0% (I no longer invest here)
|Est. Annual Returns:||Up to 5.2% Mini Bonds / Up to 4.75% Property Bond
|My Risk Rating *:|
|Autoinvest:||✓ on Mini-Bond only|
|Provision Fund:||✓ (Ending Q3 2017)|
|Loan Types:||Mini-Bonds / Property Bond / No peer to peer|
|Loan Security:||Mini and Property Bonds are unsecured|
|Lender Fees:||£50 early sale fee on Property Bonds|
|Min Investment:||£100 Mini Bonds, £1,000 Property Bond|
|Avg. Lender Portfolio Size:||Unknown|
|Time to Become Invested:||Unknown|
|Time Needed Managing:||Low|
|Lending Agreements With:||Wellesley & Co.|
|Sign Up:||Sign Up|
* This opinion risk grade factors in types of loans offered, interest rates, platform history, default numbers and my own investing experience.
Wellesley made a pre-tax profit of £1.3m during the second half of 2016 but suffered an overall loss of £210,288. On the bright side this is better than the £2.2m loss it suffered in 2015. 2015 Company accounts can be seen here. it’s my personal opinion that Wellesley isn’t a place I’d park my money. Read on for my Wellesley & Co review.
Wellesley & Co Review: What You Need To Know
- Secondary market for early exit
- Company financial health is in question
- No new peer to peer lending products
- Poor return rates, lower than some bank saving accounts
- Mini-Bonds are an investment into Wellesley & Co the company. If the company fails, you will likely lose your money
- Risk not worth returns
- Wellesley the company not profitable in 2015
- Lenders have contract with Wellesley, not borrowers
Wellesley & Co offers lenders security backed options ranging from one to five years. There’s no bells and whistles with regards to investing, just put your money in and choose what you want to do with your repayments. Read more below for my exclusive Wellesley & Co peer to peer lending review.
Wellesley & Co Review: My experiences so far….
I originally began investing in Wellesley & Co’s peer to peer loans in 2014 and highly recommended it. Wellesley & Co was my second hop into the peer to peer waters as they offered a relatively safe way great way to get started in peer to peer lending. Wellesley & Co also provided easy investing options backed by a provision fund and security backed lending, plus an early exit strategy should it be needed.
In early 2016, Wellesley & Co announced they were reducing interest rates and changing loan terms, so I withdrew all funds and have not been back since. Things change quickly in the peer to peer world and Wellesley & Co went from hero to zero in a matter of days.
What Is A Wellesley & Co?
Wellesley & Co is an alternative investment company that offers investors’ either Mini Bonds or Property Bonds. In May of 2017, Wellesley announced they would pause additional investments into peer to peer lending until Q3 of 2017 while they attempt to comply with the FCA regulators.
When Did Wellesley & Co Launch?
How Do I Sign Up?
Sign up here. Currently there are no cashback offers since Wellesley is pausing its peer to peer lending operations.
What’s The Signup Process Like?
Not bad but they do require official documents and they run the usual i.d. checks.
Who Can Open An Account?
Wellesley & Co states overseas residents can open accounts but it is country dependent. Contact them for more information. People residing in America may have issues opening an account. You have to be a UK resident to invest in the Bond products.
What’s The Minimum Deposit / Investment?
Deposit Bank Transfer: £100
Mini-Bond Minimum Investment: £100
Property Bond Minimum Investment: £1000
Is Wellesley & Co Regulated?
Yes, by the UK Government’s Financial Conduct Authority registration #655503 under interim permission. FCA regulation is nothing like the FSCS (Financial Services Compensation Scheme), which covers consumers when they deposit money in banks. The FCA does have the ability to pursue criminal action against companies it finds are in violation of its standards, but it’s not a government entity and its funded by the very companies it regulates.
Does Wellesley & Co Offer an Innovative Finance ISA?
No but the Property Bond can be held inside an ISA wrapper.
How Much Interest Does Wellesley & Co Pay Lenders and What Are the Different Investment Products?
Here are the rates as of June 2017:
Mini-Bonds are an investment into Wellesley & Co to help aid its expansion and probably help fund losses. These bonds are unsecured so if Wellesley ceases trading, you will likely lose all your money. At a maximum interest in the 5% range, the risk versus rewards on these bonds are really head scratching to me so I wouldn’t invest in them.
2 year Bond: Target of 4% gross interest paid monthly
3 year Bond: Target of 4.75% gross interest paid monthly
This new investment product doesn’t have a release date but the bond offering closes at the end of June 2017. The Property Bond will be listed on the Irish Stock Exchange and behaves exactly like a share. The minimum purchase is £1,000 and the bond price will fluctuate just like a share.
The risks here are apparent. Your original investment could be worth less when you come to sell if the bond price falls on the stock market. Also if Wellesley goes out of business, while the bond holds Wellesley’s property loans as security, the bond price could go to zero. There is also a £50 early sale fee should you want to sell your bond.
I don’t see the attraction of the Property Bond. For me the risks are simply too high and rewards are far too low. You can read the Property Bond prospectus here.
Peer To Peer Lending
All new peer to peer lending investments have been paused until Q3 of 2017. This is due to Wellesley needing to comply with FCA regulation but I also suspect investments were paused for other reasons although this is just a hunch.
All repayments will not be reinvested into peer to peer loans however investors can choose to reinvest in the Mini-Bonds
What Are the Loan Default Rates?
2016 year end default rates were 1%.
19.53% of loans are non performing predicted as recoverable while 5.16% of non performing loans are predicted as non-recoverable. You can see current loan book statistics here.
What Are the Fees?
Property Bond: Wellesley pays the brokerage facilitating the bond a fund raising fee of 0.25% up to £50 million and to 0.10% over £100 million. While investors don’t directly pay this fee, it will still come out of the fund and will negatively affect the returns. £50 early sale fee plus any brokerage trading charges.
How Long Are The Investment Terms?
One to five years depending on the product you choose (see above).
What Security Does Wellesley & Co Use?
All borrowers must place security collateral in the form of property. The average loan-to-value is below 70%. This security is used for peer to peer loans and not for Mini-Bonds.
What Are The Main Risks?
Company Failure: This is a risk with every peer to peer company. If the business model fails, investors could lose all of their investment even though older peer to peer loans are backed by property.
Economic downturn: Since Wellesley & Co has only been around since 2013, it hasn’t experienced a severe economic dump or property crash. If one happened, the risk is that properties aren’t worth what they were valued at and in the event of a quick default sale, could bring less money than was owed on the loan note.
Is There A Provision Fund?
Yes but only on the peer to peer lending products and this fund will be terminated in Q3 of 2017. Bonds aren’t covered under the provision fund. The removal of the fund is due to FCA regulation.
Am I Lending To Wellesley & Co the Platform Or To Borrowers?
All investment products are between lenders and Wellesley. In Q3 of 2017, Wellesley change its structure to become a true peer to peer lending company and all peer to peer loans will be between lenders and borrowers. If you choose Mini or Property Bonds, you will be lending to Wellesley & Co the company. Bonds aren’t a product I can recommend as the risk is much higher and the returns are poor. If Wellesley fails, you could lose your entire investment.
What Happens If Wellesley Goes Bust?
While Wellesley has a trustee in place named Wellesley Security Trustees Limited, which would assume the responsibility of managing the loan book to ensure repayment of existing loans, the unknowns of a failure are many. If you invested in the Mini or property bonds, you would likely suffer losses.
THUMBS UP FOR WELLESLEY & CO:
Secondary Market / Early Access
Wellesley & Co offers a fee-free way for you to be able to exit your loans early. A few caveats here. Firstly to stop lenders taking long term rates then exiting early, Wellesley & Co pays the exit interest rate to match what you would have received on the shorter term. For example, if you originally selected a three year term at 5% and exited after six months, you would receive the equivalent monthly term interest rate. Secondly, early exit isn’t guaranteed because Wellesley & Co is buying you out. If they don’t have the funds, they won’t buy you out but they will place your buy out before any new investments.
It’s very straight forward and looks great. Here is the Portfolio dashboard:
THUMBS DOWN FOR WELLESLEY & CO:
Company Financial Health May Be Unhealthy?
Wellesley & Co used to be considered one of the safest places to invest but now I have fears that the company might be struggling financially. This is bad for peer to peer lending as a whole because a company failure could destroy lender confidence. Wellesley & Co’s financial accounts are here and you might want to read them. Particularly troubling from the accounts was a line from the company’s auditor, BDO:
“The Group and Company is dependent on raising further capital to continue to operate for 12 months following the date of approval of these financial statements.”
Wellesley had turned to crowdfunding site Seedrs to raise capital but this proved unsuccessful and was withdrawn.
The released accounts on Companies House covered 18 months and showed a 2015 loss of £2.5m. In 2016, the numbers were better showing a loss of £210,288. These numbers are certainly not encouraging.
No New Peer To Peer Lending Products
Wellesley has temporarily paused all new peer to peer lending products. New products should be introduced in the middle of 2017.
Low Return Rates For Risk Involved
Nearly every other peer to peer lending site offers investors’ better interest rates. This is my number one gripe especially considering the company is generating 13% annual interest rates on borrower loans. Wellesley & Co’s best rate is in the mid 5% range but the risk involved to receive this return is great.
Mini-Bonds Are Risky / Agreements Are With Wellesley, Not Borrowers
To be covered, it’s always in a lender’s best interest to have loan agreements directly with borrowers. If you invest into Wellesley & Co’s Mini-Bonds, you are lending to Wellesley the company. This is highly risky because if the company fails, you will likely lose your money. Currently peer to peer lending agreements are not directly with borrowers, however this will change later in 2017.
I withdrew from Wellesley & Co early 2016 when I no longer thought the risk was worth the low interest rates they were offering. The latest rumours about company financial health further increases the risk. I don’t think the Bond products offer nearly enough returns for the considerable risk investors’ have to take. Wellesley will reintroduce new peer to peer products in mid to late 2017 so I will revaluate once those are announced.
The Wellesley & Co Review Conclusion
Wellesley used to be one of the favoured alternative finance companies but things took a strange turn when they purposely lowered their returns to deter new investors and then suspended new peer to peer lending investments. The Mini and Property Bonds offered are direct investments into Wellesley & Co rather than into peer to peer loans. The bonds were introduced to raise capital. I wouldn’t invest in Wellesley & Co as I’m not willing to accept lower rates for higher risk. There are far better alternatives in the peer to peer world. Consider Assetz Capital, Ratesetter, Landbay and Lending Works as alternatives.
Sign up here. Currently there are no cashback offers since Wellesley is pausing its peer to peer lending operations.
Wellesley & Co review disclaimers: I’m not paid to write this Wellesley & Co review nor am I employed by or any of the companies I write about. In most cases I have invested or continue to invest my own money through these companies. The sign up links on this Wellesley & Co review and in other articles on this website are often referral links. When you sign up for an account through my website, I receive a referral fee directly from the companies, at no cost to you. Your support enables me to continue to operate the Financial Thing website. You can read more about my referral links here.
This Wellesley & Co review is for information purposes only and should not be regarded as investment advice. Opinions expressed in this Wellesley & Co review are current opinions and based on my own personal experiences. Peer to peer lending contains risk so never invest more than you can afford to lose.