As someone who has made a career from developing ideas that use technology to help advisers improve their business functionality, I am often asked what the next ‘big thing’ will be for financial intermediaries.
With technology developing at such a fast pace, it’s a difficult question to answer, not least because what looks revolutionary today may already look like ‘business as usual’ tomorrow.
However, if you ask me that question today, I would have to say Open Banking.
Open Banking is going to change the financial services industry forever.
It promises a new world of security between third parties for sharing banking and other data where the customer is in control of who accesses their data.
No need to share passwords, it gives customers seamless experiences across multiple service providers.
Open Banking will change how people think about their relationship with money, allowing innovation to create a completely transparent and elevated customer experience.
The main banks are mandated by law to participate in this and others are joining too.
But what does it mean for financial advisers?
There is a perception among some advisers that Open Banking has nothing to do with them and brings no benefit. I would like to challenge that.
Open Banking can bring advisers valuable access to a set of information which is normally really hard to get.
It takes the heavy lifting out of getting this data and keeping it up to date. Whether that’s affordability data, lifestyle data or just held away assets that you didn’t know about before.
This helps you genuinely know your client and it encourages the collaborative relationship that clients are seeking.
Research carried out by the US firm, Wealth Access, shows how valuable this kind of account aggregation can be for advisers.
130 firms using Open Banking discovered $4.8bn and identified the potential for each firm to earn an extra $2,000 per client every year.
According to Judson Bergman, chairman and chief executive of Envestnet, US advisers who access Open Banking information “typically service 80 per cent of a client’s wealth rather than the standard 30 per cent” for those advisers who do not have this information.
No client acquisition costs and a potential 250 per cent increase in revenue.
That sounds like a good option to me.
To ensure that customer data is properly protected, facilitating access to this information is now a regulated activity.
All technology providers in the UK who offer this capability must become regulated under the permission of Account Information Service Providers – AISP for short.
It is something we are in the process of doing at Intelliflo.
This type of technology, that takes information from one source and blends it with data from another, is nothing new but having access to clients’ banking data and being able to really look at how they handle their finances is a game changer for advisers in my opinion.