4 Ways Asset and Wealth Managers Could Use Open Banking

by | 12 Jul 2021 | PBWM

Wealth Graph

Open Banking is by no means new, but the on-going consideration of how this could change the user experience for Adviser and Wealth Managers in the future is no longer a crystal ball gazing exercise. Article by Rich Watts.

It’s a material change in the way that digital can take advantage of Open Banking in the future and we are beginning to see Asset Managers take stock as to how this fits into their wheel house for their digital strategy.

Here are a few examples of how Open Banking could enhance the digital experience:

Simplifying On-boarding / Viability

The fact-finding / onboarding is the beginning of the adviser relationship and the first step in understanding a client’s needs. While the process is long, it is essential and does take up a lot of valuable time. This could be made more efficient / less manual if a client agrees to link their banking data as part of the on-boarding process. Some of the information that is normally inputted manually and upfront by the customer could be collected through the new API (Application Programming Interface) with the client only needing to validate the information. Much of the fact finder could become automated, freeing up time for the adviser to focus on the value-add, like gaining a deeper understanding of a client’s goals and aspirations – and using digital technology to offer solutions with interactive tools and hypothetical tools.

Dynamic Financial Planning

Banking data would provide specific insights into how consumers manage their finances – spending patterns, savings, income, surplus funds, etc. This data could be collected in real- time and therefore has the potential to transform the way financial planning is delivered: from a static plan created at a point in time to a more dynamic process, automatically optimised when changes are detected in the client’s data. The plan then changes its risk or outcomes accordingly. For example, a client’s retirement cash flow plan could be automatically adjusted if their income levels have increased. An Adviser would not have known this unless they interacted ‘manually’.

Financial wellbeing

The increasing focus being given to responsible investing cannot be left to pension pots alone, as individual investors demand the power to control how ethical their portfolio is. This is also partly a driver for firms to equip relevant investors with the skills – through online learning – and tools – such as digital portfolio modelling methods. Well-being has certainly become a key area for Advisers to focus on.

Open banking data could be used to create new tools that ‘educate’ customers into improving their financial decisions by delivering real examples and guidance as they spend, save and invest. The type of guidance provided could change as their transaction data changes e.g. customer becomes a) more proficient at saving and b) eventually leads to more sophisticated investment solutions like investment advice, say for instance, after they have built up to move up a risk band or outcome set of requirements – all of this information is hidden without the tools to help investors.

Personalised product recommendations wellbeing

Access to a customer’s transactional data should enable Advisers to make personalised product recommendations as the data will yield insight into a whole raft of information such as income, tax and levels of debt. Product recommendations could be personalised in two ways; existing products made available at relevant times or the product itself could be customised for the client.

Targeting Digital-First Clients – Millennials and Generation Z

In a digital-first world, how do advisers continue to attract, engage and add ‘human’ value when people live their lives digitally and have less time than ever to seek out advice. Reimagining the proposition for Asset Managers and Advisers will become essential in the coming months and years. We move to an age where millennials will soon be the largest pool of wealth in history and Open Banking is almost like their mantra.

The opening up of banking data will give Asset Managers and respective Advisers the unique opportunity to create new and inventive ways to grow and protect their client’s wealth and to attract new clients through innovation – digital- first at its foremost. It’s an expensive exercise, build or buy will be the board room discussion and all eyes will be on their digital leaders to tell them what to do!

Tools for the job!

The toolbox of advisory tools is going to grow considerably, but the following are the mainstays;

Dashboards – mapping customer goals against actual real-time data
Hypothetical tools – enabling users to see their financial well-being and humanise their investments. Based on a multitude of life scenarios, marriage, children, promotion, redundancy, university fees, – retirement, etc.
Human intervention i.e. Advisers – validation from a human that the strategy put in front of them has validity.
Ability to be agile – moving investments will be just like moving your electricity supplier and the results will be immediate.

So, the Open Banking landscape opens up a whole raft of UX points to build out the best possible experience and journey that truly represents the Asset Manager or Advisory brand. The question is, will the Asset Management and Adviser businesses see the value in Open Banking to invest in the technology, connectivity and data analysis to see the long-term benefit?

Appendix: Why is Open Banking being introduced?

Open Banking also part of a sweeping piece of European legislation known as the Second Payment Services Directive, or PSD2. Sometimes the two get confused: essentially, Open Banking is the UK version of PSD2. The difference is that whereas PSD2 requires banks to open up their data to third parties, Open Banking dictates that they do so in a standard format.

This makes data much easier to use, so it should help Asset Managers, Advisers and Wealth Managers create ways to position relevant products. The exact nature and of the types of financial investment products is yet to be proven.

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