How Advisers Can Take Advantage of Open Finance: Highlights from the October Investment Forum Part 4

This is the last post recapping the great disucssions from our October Investment Forum on Open Finance/Open Banking featuring panelists Tessa Lee from moneyinfo, Nick Eatock from Intelliflo, and Ross Laurie from Visible Capital. This section featured discussion about how adviers can take advantage of open finance, ease of use, and standout leaders in the field. Our next Forum session will occur on November 11th; tickets to attend can be accessed at the bottom of this page.

The thing I like is the focus on testing things out and making prototypes and doing things iteratively.

Ross Laurie:

I’m involved in the steering group for TISA, funnily enough. It’s interesting, from personal experience, they seem to be trying to move things forward slightly faster. There’s been talk about digital ID for a while but that’s too big a conversation for me to go into on this call, because I’ve got strong views on how federated identity systems will work in the future.

But I think that the thing I like about it is the focus is on testing things out, instead of talking about it, let’s just actually trial this. So let’s build a clickable prototype and see how it works and we’ll learn from that. And being an old-school developer, I like doing things iteratively, just making small incremental changes, and then eventually getting there rather than going, “how do we take three years to form huge committees and then solve the world’s problems in one go?”. It just doesn’t happen like that. So I’m enthused by what they’re doing.

More conversation in the early days could shortcut obstacles later.

Nick Eatock:

I massively applaud Ross’ agile methodology. I think that that’s what solves the world in so many ways, and not just technology. But that aside, I think Tyser could also learn from some of the stuff that’s already happened with open banking. There are some positive lessons and maybe some negative lessons there too. I would welcome more conversation around that just in the early days, because I think we could shortcut a whole bunch of obstacles that otherwise will end up slowing this down. But the actual initiative I think is a fantastic one.

How do advisers take advantage of open finance?

If you want to take advantage of open finance you have to be “in it to win it.” You need a client portal, and you need to learn from early adopters about what’s really needed. You also need to understand how your clients are using technology and make an effort to communicate digitally.

Tessa Lee:

There’s an obvious thing about taking advantage of open finance that I’m going to say before Nick and Ross do, and that says that you’ve got to be in it to win it, haven’t you? You’ve got to have a digital experience for your client. You need a client portal of some description to enable you to optimise the opportunity of open banking, because that’s how your clients will aggregate their finances together. So that’s of course, one thing that I’m bound to say.

But also I think it’s important to learn from early adopters and from those of us that have doing this for a long time now, around what it takes to actually roll out a digital service to your client. It’s not a case of “just build it and along they’ll come and they’ll start putting their accounts on and it’s all wonderful”. There’s a whole piece around adoption that we work really hard on with our firms to make sure that, clients will embrace the technology and understand how to communicate it. It’s not going to happen overnight, not everybody’s going to do it straight away and just accept that, but take it in manageable steps for you as a business.

And also I think one of the things that we really need to accept now, particularly over the last six months since COVID has hit us is how our clients use technology. “My Clients are older, they won’t use technology” –well, they will, and they are doing, and we’ve seen that all over place since we’ve all been shut at home and we can’t get together anymore.

You know, my 75 year old parents are on FaceTime or Zoom or whatever all the time. They will use technology. I think it’s fair to say sometimes advisers don’t want to use technology, and understandably so because it’s been over complex for them, they might have been let down by it in the past. They’ve had experiences that haven’t been great, but actually now’s the time to really get going with this and your clients will use it.

They may need some encouragement from you, some of them won’t need any encouragement, but if you start to communicate with your clients digitally alongside open banking, you know, secure messaging, document sharing, make it part of how you deliver your advice processes, then you’ll get that adoption. And of course, if you get that adoption, that’s where you can really start to maximize the opportunity of all these things.

We try to make it as easy as possible because we recognize that advisers don’t like restrictions. It’s important to make things as straightforward and easy to use as possible for the customers.

Ross Laurie:

I’d embrace it and everything Tessa said I agree with. I think the trend is definitely towards digitized services. Be inquisitive, look at your own business and see really where you’ve got problems that you could improve. Look at what technology is out there and give it a go. We recognize that advisers don’t like integrations. We don’t like change.

So we’ve just tried to make it as easy as possible. Click the button and trial it out, and I think that’s the attitude really; try and encourage our customers to use it as well.  Back to Tessa’s point, my mom’s the same age, and this [Visible Capital] all came about, because she was doing a fact find with her adviser using some software that one of my old businesses built eight years ago, and she got the answers right.

I mean the bottom line was right. But if he was looking to give her advice on changing where she spends her money or whatnot, you would never been able to do it because the data was just arbitrary. And so we were just trying to make it as easy as possible to use. And encourage your customers to do the same, because to my mom’s point, she said, “you know, I’m going to struggle with this.” And I reminded her. She’d been through decimalization. So this is pretty straightforward as a comparison.

COVID has increased people’s technology usage. As an industry we’re always segmenting people into categories to predict how they’ll behave, but they’re individuals. The best engagement of client portals happens when the individual treats it as their financial dashboard that they have ownership over.

Nick Eatock:

What a stand out for this session to hear Tess sort of channelling her Dale Wynton with a fantastic impression, “in it to win it”. I like that. That was cool. It was great and very, very enjoyable. The age demographic has also changed over COVID, you know. COVID has moved that on as well, we have to recognize that it’s been a contributor to people’s use of technology and maybe their willingness and their desire to learn. I think that that’s been a very noticeable factor.

For years now, we as an industry, have tried and segmented users into age categories that we think defines how they behave. I think that’s the stuff of nonsense, frankly. I think we’re all individuals and different individuals behave in different ways based on how they want to, and certainly the data underpins that completely.

I think in terms of how to optimize the opportunity apart from being in it to win it, which is absolutely true, I think you also need to think about what it is you’re trying to do. And if your entire game plan is about how to optimize the advice process, which isn’t a bad game plan by any means, then I’m not convinced you will succeed because I think you have to have half a foot in the camp of the actual client and knowing what is it that they want.

The best engagement of client portals in my view happens when the individual treats it as their financial dashboard, so they get ownership of it. And that means transparency over information, a place to go holistically and see everything they’ve got 24/7, whenever that is. Open banking actually compounds that and adds more to the equation. So that’s one of the good pieces about it.

So bear in mind that twin track, that actually sharing the information is important. And I think when the industry was pretty immature in terms of client portals, there was a reasonable reluctance from the advice marketplace to share information on the assets that the client held mainly because of fears of data and data quality.

In fairness, I think that has moved on. And I think advice businesses now are recognizing actually making sure that your data is of good quality, and then sharing it is an important part of your end client engagement and relationship.

In general we get access to 12 months of data from the bank.

Ross Laurie:

The regulation states that whatever data the bank makes available to the customer is what we can get access to, and it’s basically 12 months. When it first started, some banks had 10 years, but interestingly enough, they’ve all gone to 12 months.

Obviously we can then pass that into your existing back office so you can store it, and reference it that way, but you’d be surprised what you can find out in a year. Of course you’ll be having conversations with your clients anyway, so you should have an understanding of where they are in the life stage and what they’re going through. But I suppose for new businesses where you’ve not met them, that 12 months can give you a good indicator.

We’re not trying to replace or automate the advice process, but instead complement it.

Tessa Lee:

I’d agree mostly it’s 12 months that we’re getting, there are some on refreshes that are going back 90 days. So it is varying for some I think most of the big banks are all 12 months. And obviously that does give you a pretty good picture on a rolling basis, but I guess again, Ross mentioned this as well….We’re not trying to replace the advice process with this or fully automate it or digitise it.

We are complementing what advice firms and wealth managers are doing with their clients. It’s supporting those advice processes not trying to take them over. So there’s always an adviser having a conversation with the client alongside this, so that’s how you mitigate these things. If there are things within that breadth of data that are missing, it’s those conversations with the clients that are supporting. So I would echo that point from Ross there.

The tools can definitely identify unusual spending.

Nick Eatock:

Just quickly on Steven’s question, I think much of the answer to this depends on the usability of the solution, that’s…… And then push it into categories that then form an informative affordability section of the fact find. So those tools can absolutely identify unusual spending. And if it’s part of the journey, then you can use that journey to then ensure that the data that you’re then sharing with that affordability, whether it’s, in a back office system or whatever, can have a fact finding process can be removed from that equation. So I think it’s about the usability, and I’d look at how those solutions work.

Are there any standout leaders in the field to look at?

Jo French:

I was just wondering, it’s quite exciting listening about some of the efficiencies in the speed and the customer ownership. And I was wondering that with this focus on proposition enhancement across the board, particularly from a distribution perspective, are there any standout leaders in the field harking back maybe to some of the services internationally or some of the differences that we’ve seen with some real leadership here?

Ross Laurie:

I mean, it’s a pretty short answer, but actually just using it is the most innovative way – we don’t have any other way of measuring that, you know: did you use it, did it work? Do you want to keep using it? “Yes”. So, I mean… I don’t know how to answer other than that.

Taking the paperwork out of businesses is very innovative and useful. There are some innovate functions used, but for the most part its to add data for the ‘know your client’ process.

Tessa Lee:

I’d agree with that because you know, it is being used to support the advice process. Particularly we talked about, knowing your client’s income and expenditure. It’s really valuable, and it obviously is taking a lot of cost and a lot of paperwork out of their businesses. And actually taking paperwork out of business is innovative for advice firms because we’ve been so paper heavy for so many years.

So we’re seeing people, massively reducing not just their carbon footprint, but their costs from getting rid of this paperwork and you know, automating things through the portal, not just open banking, but other stuff, that they’re communicating with their clients on. We see some different types of firms, some that are using it to support power of attorney processes, for example, where they have power of attorney over a client’s assets.

And it’s much easier for them to get access to information that typically could have been more difficult. So there are some little gems in there, but typically it’s all about using that data for that ‘know your client’ process to support the advice process. And that in itself is innovation, I would agree.

Those who adopt the technology in the top quartile outperform everyone else across the board.

Nick Eatock:

I think they should make it part of their client onboarding process, so that as a business, this is how we interact with clients. And it’s not just put out there and left saying, “right, let’s assume if you build it, they will come”. You actually have to make it part of your proposition.

And in truth, that’s not very difficult, but it starts with the fundamental question: Do you adopt the technology or not? And businesses for a long, long time have been providing technologies; getting on for 15 years in the advice industry and the range of different firms in terms of their adoption of the technology is quite wide.

And we can see that the RE Adviser Index states this categorically: Those who adopt it most in the top quartile absolutely outperform everyone else. 100% of them outperform everyone else on clients, assets, recurring revenue– all of the things that make the finance director happy.

Do you have any final summary points?

Open banking is a great opportunity because it encourages more engagement from the client.

Nick Eatock:

I think we summarized it at the end pretty well. Seize the opportunity, make sure you understand that this genuinely is an opportunity and it works, understand it, think of it from an end client perspective and how this can be part of a process where they are more engaged with the process than they would be otherwise.

And I think open banking is a really great opportunity in that respect because it provides a reason to log in every day and start seeing information. The very fact that they’re engaging more with you or your services is absolutely a strong indicator for success.

Your clients only need one app, and you want to be that primary interface and are in a good position to be so.

Tessa Lee:

I feel like I should tell people to “go wild in the aisles” if I’m rocking Del Winton today, as my closing remark, but I’m not going to say that– I’m going to just say that your clients only need one app that’s going to do this for them. One app, that’s going to bring together all of their finances alongside your communications, alongside your advice processes. And you want to be that primary client interface.

So, and I’m going back to it again. I said before you are in a unique opportunity right now, because you are ahead of the game, you’re way ahead of open finance already with the access to data that you have and the breadth of data you can bring together for your clients. And the trust that you have from your clients, this is why one of the reasons we get good adoption is because of the trust clients have with their advisers and their wealth managers. So I think now’s the time to embrace it and just go wild in the aisles.

Let’s use technology to give more advice.

Ross Laurie:

We talked about pensions dashboard, advisers are in a position that they can effectively offer those types of answers to customers. But I would just say, if there’s any good comes with this, I would go and have a look at it. None of us go into this to become administrators. The regulator keeps giving us more admin. Let’s start looking at how we can use technology to stop being an administration company and start advising again.

About The Author

Emma Iskowitz

Originally from New Jersey, Emma previously worked as a writer, researcher, content creator and podcast producer for fintech consulting firm Ezra Group LLC. Emma graduated from London Contemporary Dance School in July 2020, and alongside her work at FTRC she is also pursuing a career in contemporary dance.

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