What is the key to making consumers’ decision making simpler, restoring trust in long term savings and unlocking untapped financial potential? Data.
Who, or what, knows you best?
All powerful and sitting comfortably in my pocket is my smartphone. Though weighing just 171 grammes it knows when I stir from sleep and when I switch off for the day. It knows details of my commute – the home I leave, the workplace I reach, even my recreational running routes. It knows the books I read, the movies that I love, and even for how long I boil my eggs in the morning! Against this backdrop of hyper-connectivity and swathes of data, comes the FCA’s advice-guidance boundary review.
Why change?
Outlined in the FCA’s DP23/5 consultation are three fundamental changes which create huge opportunities for firms ready to embrace data powered digital experiences:
Loosening of the current ‘binary’ advice regime
Targeted support for customer groups built around shared characteristics i.e. ‘customers like me’
Simplified advice to tackle less complex needs
These proposals represent a significant stride toward modernising financial services. Primarily, they aim to resolve three key flaws in the current long term saving, investment and retirement planning markets, namely:
The cost of taking advice: Trying to eliminate all consumer harms by throwing people, process and compliance at the problem mean current models are too expensive for most consumers
The cost of not taking advice: Consumers are missing out on the potential for higher returns or make bad decisions because it’s all too complicated
Consumer capability: Not knowing when (or who) to go to for help, or if it will be worth it
A better way?
What if there were a way to address all of the above that was widely accessible, was automated, repeatable and scalable to keep costs low, and where a consumer’s own data provided an audit trail to evidence suitability and constantly improve upon consumer outcomes?
Moneyhub’s smart Open Finance platform gives firms the tools and intelligence they need to identify customers who might benefit from one of the new forms of guidance or support. Firms can quickly and easily gather consumer data upon which to base their guidance and create automated next best actions, on a 121 basis or for cohorts of customers, including signposting to full advice or opening and managing simple products. When a customer’s personal circumstances or a firm’s products change, Moneyhub can identify the changes and nudge the customer to take action to keep them on track.
Bridging the gap
The FCA’s consultation paper highlights that only 8% of UK consumers received full financial advice in 2022 and is seeking to examine how innovation could expand the market to new forms of advice and support because 'The gap between holistic financial advice that is unaffordable for many, and guidance that is free to access but not personal to the consumer, is simply too vast’.
Moneyhub’s own innovation research with consumers routinely shows that when it comes to their money most people want to know just three things: What have they got, are they doing ok, and what to do next? However, even asking simple questions about their personal finances can create fear, complacency and disengagement amongst many people for whom getting advice about their money is neither affordable nor accessible.
By contrast, allowing customers to share their financial data using Open Banking and Open Finance provides a rich and accurate picture of exactly what they have and how they live. Data can identify opportunities to help customers such as finding spare cash that could be put to better long term use, visually showing them the impact of regular saving and the effect of compounding, or gathering all of their retirement assets in one digital location to show them a range of retirement possibilities based on their own personalised goals and as a precursor to full advice.
Why wait for change?
At Moneyhub we are firmly of the view that combining our technology with the FCA's proposals to relax the advice-guidance boundary represents one of the most exciting opportunities in a generation for financial service providers to redefine their approach to long term savings and better serve their customers.
Leading financial services firms such as Standard Life, L&G, Lloyds Bank, Scottish Widows, Mercer, Aon and Nationwide Building Society already trust Moneyhub’s technology because they see the potential for superior customer engagement and consumer outcomes through data powered customer journeys.
The FCA’s consultation does not close until the end of February 2024 however there’s no need to wait. Moneyhub’s white label Open Finance platform is helping consumers take control of their money and increase financial wellness across a range of savings, borrowing and retirement planning use cases. Moneyhub’s digital tools offer the prospect of supporting many more consumers with their financial decisions in future. Imagine a world where, over breakfast, your customers will quickly approve an automated sweep of some spare money to their ISA whilst waiting for their eggs to boil.
Simon Ripton is Moneyhub’s Proposition Director and a former IFA