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Making Financial Advice Affordable to the Masses in the Age of Digitalisation

July 24, 2018 • FINANCE & BANKING, Digital Transformation, Editor’s Choice, Banking Innovation, Personal Finance

By Tim France-Massey

Many people in the UK struggle to navigate their way through uncertainty in the current financial climate and achieve their financial planning goals. However new regulations have resulted in a market influx of fintech companies and third-party providers, bringing to consumers innovative new technologies integrated into banking services that at last mean financial planning tools and advice – which were once only available to affluent clients – are now becoming available to everyone.

 

The financial services industry provides essential facilities, which are fundamental to support our modern economy and society. Given the current financial climate in the UK, many people are unable to achieve their goals, struggling to grow their savings, and make better financial decisions. Seeking advice for even standard queries – from sending children to university, to managing finances to ensure a comfortable retirement – can cost £1000s when speaking directly to a financial advisor or wealth manager.  

Customers, even those with high income, are often maintaining a spreadsheet to track all their banking and investments accounts across different institutions. Although low cost, this method is extremely time consuming and opens a new market which innovative fintech companies are beginning to tap into.

The problem is consumers today need financial advice more than ever before – with worldwide interest rates at rock bottom since the last recession, the UK savings ratio has plunged to an all-time low of 4.9%.1 The new Pension Freedoms has resulted in pensioners able to go into “Drawdown” instead of buying an Annuity, with nearly half a million retirees taking this option, and yet a third of them having no experience of being invested in the stock market.2 In fact, according to the FCA, only 6% of UK adults have had regulated financial advice in the past 12 months.3 Customers, even those with high income, are often maintaining a spreadsheet to track all their banking and investments accounts across different institutions – trying to build up a holistic picture of their net worth, spending trends and budget by themselves. Although low cost, this method is extremely time consuming and opens a new market which innovative fintech companies are beginning to tap into.

 

New regulations shake up the market

Earlier this year the financial services industry saw the implementation of the PSD2 regulations in Europe and the Open Banking regulations in the UK, which require banks to allow customer to give permission for FCA-regulated providers to access their current account data via Open Banking APIs. Therefore, the market has seen an influx of new third-party providers, larger technology giants and entrepreneurial fintech start-ups, who can access customer data easily, through the new regulations. New technologies such as robotics, artificial intelligence (AI), and blockchain are now being integrated into financial services, enabling companies to start bringing financial and wealth management advice – traditionally expensive, and only available to affluent clients – to virtually anyone.

 
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About the Author

Tim France-Massey is Director of Digitalisation, leading consulting engagements for major UK financial institutions from Wipro Digital’s London Lab. As Head of Digital and Data at Barclays Wealth, Tim led the digital transformation of Private Bank client and colleague propositions, and as Head of Mobile at RBS/Natwest, launched the UK’s first ever iPhone Mobile Banking App, a catalyst that helped lead to the widespread adoption of mobile banking.    

 

References

1. Office for National Statistics (ONS) 30 June 2017 (https://www.ons.gov.uk/economy/nationalaccounts/uksectoraccounts/bulletins/quarterlysectoraccounts/octobertodecember2017)

2. ThisIsMoney – YouGov Survey for Zurich UK (https://www.zurich.co.uk/en/about-us/media-centre/life-news/2018/third – of – retirees – relying – on – drawdown – are – first – time – investors)

3. FCA Financial Advice and Guidance: Quantitative research to inform the Financial Advice Market Review (FAMR) Baseline June 2017 (https://www.fca.org.uk/publication/research/famr-baseline-report.pdf)

4. Consumer interviews conducted by Designit, a Wipro company, in 2017

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