A new piece of legislation is expected to help banks re-enter the advice market and consolidate their clients’ pension assets.
Jon Dean, a senior consultant at Altus Consulting, which helps financial services firms overhaul their businesses using fintech, said new European legislation, the Payment Services Directive (PSD2) will make it easier for banks to target consumers.
Big banks not already offering advice are poised to launch technology-led advice services designed to get hold of their clients’ pension assets as soon as this year, he said.
PSD2, effective in large parts from 13 January, means European banks must open their data and infrastructure to fulfil regulatory requirements.
The regulation introduces a number of rules which will affect financial advisers, including the right to erasure, meaning an individual can request the deletion of personal data relating to them, and the right to access, meaning an individual can demand information on how their data is being used and a free copy of their personal data.
But it also introduces the right to data portability, which means a person must be able to transfer their personal data from one system to another without being prevented by the handler of their data.
Mr Dean said this made accessing data a lot easier. "At the client's request firms will have to open that account data on them. Now you can do that through a secure pipeline and customers turn on and off the permission," he said.
At least five banks, Lloyds, NatWest, Santander, HSBC and Nationwide, are already testing their ideas with the Financial Conduct Authority (FCA) as part of the regulator’s sandbox project - a safe haven allowing them to explore the regulatory boundaries of potential new products and services using technology.
Some, such as Santander, have already re-entered the market, and HSBC never left.
Santander, which claims 14 million customers in the UK, launched its advice comeback in January 2016, aimed at customers with £50,000 or more to invest.
HSBC said it had continuously operated in the advice market in the past years, including retirement advice.
A spokesperson for HSBC said the bank provides advice on how to use a pension, "whether consolidating existing pensions or making important choices about taking income" but it does not give defined benefit transfer advice.
The bank charges £420 for investment advice and a total of £960 when retirement advice is included, with an implementation fee charged as a percentage of invested assets and capped at £5,000.
"Customers have told us they prefer a lower upfront fee, and we believe this encourages customers who haven’t received financial advice before to seek it," the spokesperson said. The first no obligation meeting is free.
Nationwide declined to comment but the regulator stated on its website in December the building society was testing an "automated solution providing digital savings guidance and investment advice" as part of its sandbox facility.