This weekend I was at the JP Morgan Pensions & Savings Symposium at Gleneagles. Reflecting on the flight home at 30,000 feet here are 10 reasons why FinTech will help close the advice gap.
There's lots of work to do but in the medium to long term I have no doubt the landscape will look very different - and not for the reasons you might think!
In no particular order…
1. Auto enrolment. While starting with a low level of financial commitment the behavioral nudge (opt out rather than in) enabled by new systems has got millions saving with very low opt out levels. The question now is all about how to get the savings levels up. Over time these customers will build significant pots and will need advice on how best to access them.
2 Pensions dashboard. The approach is right; open standards will allow providers, FinTech companies, advice firms and others to access customer pension information securely and reliably. Having built our own portfolio aggregation and valuation capability for the retail market over the years we know how difficult this is, but also how profound the benefits to the customer can be. Accessing information on corporate pensions will be a huge benefit to advisers too when this is ready. The more accurate and holistic the information available, the better the guidance and advice that can be provided.
3. Automated advice will become commonplace, driven in part by dynamic FinTech companies but also incumbents determined to innovate and a supportive Regulator (seeProject Innovate). The successful ones will use a hybrid model that blends the best of digital with face to face or phone based advice. Many firms already use our API so they can leverage the UK's most widely used asset and risk model, saving them time and money and helping them benefit from our 10 year track record. Our own AccessAdvice initiative will make a big impact helping advice firms open up access to their own advice digitally next year.
4. Financial Advice Market Review (FAMR). The Treasury remains committed to progressing FAMR's recommendations. I've said before that if they are fully implemented the advice landscape will change - and rapidly. Clarifying the boundary on guidance so that risk based choices can be assessed without the regulatory burden of a personal recommendation will clearly be welcomed by many firms and institutions. Clarifying the suitability requirements for a streamlined process will be equally impactful. If you're interested in how DT can help please let me know!
5. Pension Freedoms. These have led all the big providers to gear up their call centres and up their game in terms of information and guidance online. They now have the capability to support very large numbers of customers and this will be a powerful channel.
6. The new Treasury Minister. Take a look at this speech from Simon Kirby the Treasury minister on the Pensions Dashboard launch last week. He is clearly passionate about the use of technology to help provide consumers with the information they need to make better financial decisions and for it to form the bedrock of good financial advice on what are often complex decisions.
7. Digital support for suitability. Since 2011 the Regulator has helped the adoption of FinTech solutions for suitability. Encouraging ‘apples for apples’ comparisons of the risks that investors are willing and able to take with the risk investments represent. Almost every quarter since 2011 has seen record usage of Dynamic Planner and the number of advisers using our iPad app has grown by 250% over the last 6 months. It's now supporting discussions with many thousands of customers.
8. Project Innovate. The Regulator is now helping hundreds of firms through the authorisation process and / or to operate in the regulated space. The Advice Unit is focusing on automation. This feels like a tailwind for FinTech.
9. Modern, open architecture investment platforms. Almost all investment platforms have been in, or plan to go in, for a 'pit stop' to refresh their technology. The modern platform doesn't seek to bundle advice and guidance tools but to make integration easy with well documented APIs and open standards. Forward thinking platforms are building out partner ecosystems which allow specialist FinTech firms to deliver planning and advice support services using the platform’s accurate data.
10. Pensions Advice Allowance. This would allow people to take £500 tax free from their defined contribution pension to redeem against the cost of financial advice. Assuming the consultation delivers it will only help grow the number of advice firms serving this market. FinTech will be critical in helping firms offer an accurate and efficient service for this level of fee.