Why there is a need for fintech innovation

This article is part of
Guide to making Project Innovate work for you

Indeed, according to the BBA's 2015 research, The Way We Bank Now, nearly 2.3m people aged between 70 and over 100 years old are now using internet banking.

The study also showed: 

  • More than 450,000 customers over 60 are harnessing banking apps on smart phones, iPads and other tablets.
  • More than 600,000 of those using internet banking are 80+.
  • More than 306,000 customers aged 60+ have signed up to receive text alerts from their bank.

Advice gap

Charles Owen, founder of online alternative investments platform CoInvestor, agrees with general adviser sentiment that the advice gap - which was acknowledged in the March 2016 Financial Advice Market Review - was largely a result of two major pieces of legislation.

These were the implementation of the Retail Distribution Review, which led to a reduction in the number of advisers in the UK, and the Pensions Freedom and Choice regime, which created a high demand in people needing pensions advice.

Mr Owen says: "The advice gap is a by-product of regulatory and technical change. The RDR came into effect to ensure retail investors were not being mis-sold investments by advisers who were incentivised by commission."

However, he believes this has led to "many retail investors not seeing the value in financial planning advice, and choosing to opt out of the advisory process instead".

This has led, in his opinion, to the rise of do-it-yourself investing using online investment platforms such as Hargreaves Lansdown's Vantage. 

Those advisers not embracing this change and creating a means to win these potential clients back through better use of technology will miss out. 

Research by consultancy EY has revealed that, by the end of 2016, there were up to 70 players offering, or planning to offer, an automated advice solution.

The report, Managing Risk in Automated Advice: How to be a Robo-Cop, stated: "There is certainly a feeling that companies which would not have considered entering the robo-advice arena five years ago, are now recognising the competitive advantage such solutions can offer."

Mr Bamford agrees the advice gap needs to be closed, and fintech could go a long way to closing it, but this really does need proper innovation; developments that help financial planners. It's not just about robo-advice.

He explains: "In order to close the advice gap, I believe we need a variety of new technologies."

Mr Owen agrees. "Technology in the form of robo-advice has been advertised as a solution to the advice gap. Robo-advice, however, merely directs money towards a risk-weighted strategy in isolation of any understanding of the consumer's overall situation.

"Good financial planning is unlikely to become automated in the near future but technology can support financial planners better by providing wider access to their client's portfolio."

Regulatory support

To get on top of these trends, provide workable solutions to the challenges these trends present, and to create sustainable, scalable businesses that will continue serving clients well into the future - that is the rationale behind the FCA's Project Innovate.