As investor interest in peer-to-peer (P2P) lending grows, a number of automated investment services that act something like robo-advisors to P2P investors are springing up to help investors manage their portfolios of notes. One of them is BlueVestment.
This is becoming increasingly important. Diversification on a P2P lending platform can involve hundreds or even thousands of individual notes, since those notes can be purchased in denominations as small of $25. If it's difficult to manage a portfolio of 30 or 40 individual stocks, it's infinitely more difficult to manage a portfolio 500 or more loan notes.
Here's what BlueVestment has to offer in the cause of automating your P2P investment activities.
Who Is BlueVestment?
The platform actually has two primary components. The first is the BlueVestment website, which you use to configure the second component, which is the BlueVestment engine. The BlueVestment engine runs on the platform’s servers, and is not something that you need to install yourself.
BlueVestment is a third-party service that only interacts with Lending Club, but is not directly affiliated with Lending Club. However, you do need an account with Lending Club in order to use BlueVestment.
BlueVestment performs your investing activities on Lending Club on your behalf. For that reason, you will need to provide the platform with your Lending Club API. The information will be securely stored on BlueVestment servers. The service then runs continuously throughout the day to take advantage of investment opportunities as they arise.
BlueVestment Tools and Features
Here is a summary of just some of the tools and features that BlueVestment has to offer investors in the P2P space:
Multiple account support. If you have two or more accounts with Lending Club, BlueVestment can manage them all for you. Best of all, the account will be combined to determine the fee that you will pay. This is good news because BlueVestment uses tiered pricing, with lower fees charged for a higher volume of account activity. See the BlueVestment Pricing section below for more details.
“Lightning quick investing.” Since investor participation in P2P lending, particularly with Lending Club, is increasing rapidly, speed becomes ever more important to investor success. An automated system like BlueVestment can give you the speed that you need to get access to the most attractive notes to invest in, before they've been scooped up by the growing pool of P2P investors.
Automatic investing. You create simple loan filters, or use advanced loan filters which enable you to filter on over 90 different metrics. You can also prioritize your loan filters, if you decide that certain filters are more important than others. You can also specify the dollar amounts to invest in each note, and even invest in multiple notes on the same loan. The platform enables you to maintain a minimum available cash balance, beyond which no additional funds will be invested.
Fee refunds on charged off notes. If BlueVestment acquires a note for you and charges you a fee, and the loan is charged off, the fee will be refunded to you.
Security. BlueVestment uses industry-standard SSL encryption to protect all data transmitted between your web browser and the BlueVestment servers. All sensitive data is encrypted, using the same encryption methods used by banks. In addition, your payment information is stored off-site in BlueVestment's PCI compliant payment processor.
BlueVestment has four separate pricing tiers, based on your account activity (not account size).
- Less than $1,000 invested per month – Free – the fee is based on notes issued only
- Between $1,000 and $5,000 – 0.45%
- Between $5,000 and $20,000 – 0.30%
- Over $20,000 – 0.20%
The fees are applied to the investments made each month in loans that are actually issued that month, and not to your total account balance. As an example, if you were to invest in notes totaling $50,000 in one month, the fee structure would look like this:
- On the first $1,000, no fee
- On the next $49,000 – 0.20%, or $98, since $50,000 in total investments for the month is over $20,000, and therefore qualifies for the 0.20% fee rate
- Total fee – $98
There is a $2.00 minimum of all monthly non-zero fees. In addition, the fee is based on the sum of all of your P2P accounts managed by BlueVestment. This is similar to other investments like Betterment or Wealthfront.
It's also important to understand that notes invested into in one month may not be issued until the following month. In that case, the fee will be applied when the notes are actually issued.There is no annual fee, and no charge for un-invested cash. In addition, fees do not apply to notes that have been charged off at any point. That means that if a note is charged off at any time that you own it, and you paid a fee to BlueVestment to acquire it, the initial fee charged on the acquisition will be refunded to you.
Will BlueVestment Work For You?
Let's start this part of the discussion with the obvious strike against BlueVestment – it only applies to Lending Club. If you invest through Prosper, Funding Circle or any other P2P lending platform, BlueVestment will not be available.
But assuming that you have one or more accounts with Lending Club, then BlueVestment is definitely a service worth investigating. Not only does the platform offer lightning fast investing, but they also provide support for multiple accounts, and fee refunds on charged off loans. That last benefit is almost unknown in the investing universe.
But the basic fee is another area where BlueVestment stands out. Not only is the free investing of up to $1,000 per month attractive to new and small investors, but the tiered fee schedule, that lowers the fee to 0.20% retroactively on all of your investing for the month in excess of $20,000, is a real bargain compared to competing services.
And just as important, the fee is applied only to notes that you purchase in a given month, and not on your cumulative note portfolio. This means that BlueVestment is acting primarily in a broker capacity for the purchase of your loan notes, rather than in a complete management of your portfolio. That's a fee structure that would make traditional investment managers extremely nervous.
Given the level of service that BlueVestment provides, as well as the fee structure that is more than fair, this is a service that you need to check out. Seriously.