Technology  

An investment in technology is necessary to engage emerging savers

Ian McKenna

Ian McKenna

News from Hargreaves Lansdown‘s latest financial results that 80 per cent of their new clients over the past year were under the age of 55 has massive implications for the entire personal finance market.

On a positive note, it suggests that some young consumers are willing to engage with their long-term financial security far earlier than ever before. Conversely, it begs the question how many established personal finance organisations, both investment providers and advisers, have the right proposition to attract these young consumers? 

Has Hargreaves, because of its online proposition, been able to cream off a large percentage of those young consumers who want to save? I fear this may be the case. Indeed, it is clear that advice businesses, of all shapes and sizes, need to be able to give consumers the online propositions they appear to want if they wish to attract the younger generations of savers. 

Hargreaves’ results make a compelling case for substantial investment in the technology and services necessary to engage emerging savers. It should also be recognised that a far higher percentage of these young savers will also now benefit from employer’s pension contributions via auto-enrolment, so they are already building their financial portfolio. 

New customers are the lifeblood of a business

New customers are the long-term lifeblood of any business. Any organisation that is not taking on new customers is slowly dying. For some time, advice business consolidators have been keen to understand how a business has been growing its customer base as part of their acquisition process. The value of companies where the client base is people in retirement with declining assets is reducing. 

Any assessment of the young savers market should also take into account micro savings propositions like Moneybox and Plum. By providing tools to allow individuals to save very small amounts very frequently, these companies are attracting hundreds of thousands of savers.

I believe their impact is far more significant than the so-called first generation robo-advisers, who in reality, for the most part, just offer an online way to invest in a limited range of investment vehicles, typically via ETFs. They invariably use no robots and offer no advice.  

It is a reasonable assumption that young customers will expect an outstanding user experience and on-boarding process. While there may be some exceptions, overwhelmingly this generation lives on its technology and will not expect, or indeed accept, anything else when it comes savings and investment.  

Where should the tech come from?

I believe there is an important question to ask about who is best able to meet advisers' needs to support such customers. Should this tech come from the business that provides the practice management, financial planning and portfolio management capabilities or even their client portal services? Or is this a genuine opportunity for platforms to extend their collaboration with advice businesses?

In practice only the largest companies will have the financial resources to build their own software to support such customers.