A new regulation introducing higher investment limits is likely to attract yet more investors to the fast-growing and popular Dutch crowdfunding market.
Reacting to the strong growth of crowdfunding in the country, Dutch regulators have updated the legislation regarding loan and equity crowdfunding. In April 2016 a new decree came into force to improve the regulation around the market. The decree includes a number of updates and new regulations, such as doubling the investment limits for debt and equity investments.
Investors will also be better protected under the new decree. For example, investors are now required to complete a suitability assessment, while platforms must offer investors a “cooling off” period to enable them to reflect on their investments and cancel them if necessary within 24 hours of the initial investment decision.
As per our 2015 Global Wealth Managers Survey, Dutch HNW investments into alternatives are typically either in hedge funds or in private equity. However, there is always room for new types of investments. The increased compliance requirements will lend more weight to loan and equity crowdfunding platforms, while higher investment limits for retail investors will improve the attractiveness of the asset class for those with more to invest.
While the alternative online investing market (which includes crowdfunding and P2P lending, for instance) currently forms only a small fraction of the broader alternative investments class, it is growing fast. According to research by Cambridge University and EY, the Dutch alternative finance market grew by 70% from $50m (€46m) in 2013 to $85m (€78m) in 2014. And there is no sign that this growth is slowing; according to crowdfunding consultancy Douw & Koren, crowdfunding in the first half of 2015 was more than double compared to the figure in the first half of 2014.
Wealth managers should pay attention to the development of the field and consider the avenues through which they can add value to clients who are keen on crowdfunding.