How fintech is changing client experiences

Monday 30 September 2019


Author: Christian Burgin, CFA

People are becoming more responsible for their own financial lives, and recent regulation reflects this. But the industry needs to provide better tools, and use technological innovations to support their clients, writes Christian Burgin, CFA

We are all having to become more responsible for our own financial lives.

The paternalism offered by defined benefit (DB) guaranteed pension schemes has been phased out, owing to a combination of longevity, lower asset returns, and changes to accounting standards (among other things). On top of this, we're moving around jobs more, working longer, and working more flexibly. We have entered a brave new world of retirement individualism, where the onus is on individuals, as much as investment companies, to ensure members retirement futures.

What does this mean for retirees? Last year’s Office of National Statistics’ (ONS) Wealth and Assets survey revealed that only 42% of non-retired respondents said they knew enough about pensions to make decisions around savings for retirement. It is no wonder then, that we are seeing a myriad of financial literacy and educational initiatives taking place in the UK, and more widely.

Growth of complexity

One of the challenges we are facing is the growth of complexity. We can have multiple sources of income, and multiple different pots where things are saved and stored. These might be non-traditional assets, such a cryptocurrency, or be spread across many different holdings and brokers.
Couple this with having no set retirement date, various career breaks, an uncertain return environment and increasing regulatory and client demands, and you achieve the perfect storm. For financial advisors and institutions, it means that gathering the appropriate information on clients is both a lot more cumbersome and a lot more important.
In order to accommodate the changes to everyone’s financial lives, and in some cases driving the changes to our financial lives, regulation has changed and evolved over time. Key regulations, including aspects of MiFID II, the end of auto-annuitisation, the Retail Distribution Review, and Lifetime ISAs, have all changed the investment landscape. The costs of complying with new regulations has fallen fairly squarely on investment firms. Too often though they're seen as a burden, where really there should be perceived as an opportunity to give each client the most suitable advice possible.
Adopting the right technology

Technology is obviously a huge help in delivering regulatory compliance. It allows data to be more quickly and easily collected, enabling advisers to meet and exceed their regulatory obligations. It also allows customers to have a better experience, more akin to what they have in other aspects of their lives, all while saving time and money.

Clients are rightly becoming more demanding. They don't want to sit filling in paper forms, trying to pull together all their other financial data to give a picture of their financial situations. This is in no small part owing to the tools available in other parts of our lives - our data is portable, we can quickly and easily get things we need in a way that's convenient, and a whole industry has grown up around improving customer experiences, optimising for every single interaction. Millennials are the largest generation alive, and they are less accepting of poor customer experiences, and are savvy enough to know the difference.
By using new tools that have become available in recent years, and the new regulations that have made them available (Payment Services Directive II, Open Banking, upcoming Open Pensions and Open Finance), clients have ownership of their own data, and can port it to places that give them insight and make their own lives better, in this instance receiving the most suitable advice possible.
The relevant technology works by allowing people to control of their own information.  For example, certain Fintech companies can provide faster, more compliant onboarding by allowing customers to use their data from other sources to create a picture of their financial lives. This allows for a more accurate assessment to be made, which then informs the financial advice they receive.
Another Fintech company gives people affordability reports to show what they can afford to borrow – aiding not only affordability, but also financial inclusion by allowing people access to appropriate credit where conventional methods may not have allowed it. Another organisation provides many tools, including an Integration Hub and Pensions Dashboard, which gives people visibility of their data and the ability to share it.
All of these initiatives are concerned with giving people control of their data, and the tools to help make sense and use of it. Going forwards, as the data is structured, it will be possible to give clients better outcomes, and better model out scenarios - for example being able quickly and easily back test suitability against outcomes. It is also possible to aggregate data across any given investment firm, making assurance and audit much, much quicker. These new technologies can also be used much more easily for Management Information (MI) reporting, look through compliance (knowing your customer’s customer), and FCA audits.
People are moving to be more responsible for their financial lives, and recent regulation reflects this. But customers need better tools and support to ensure they get the most suitable advice. Using technology is going to help firms not only meet (and exceed) their compliance requirements. It will help provide highly accurate individual reports based on a client’s actual data. It will also provide the ability to see client information in aggregate and understand clients better. Fintech is allowing practitioners to look at what aggregate risk looks like, to back test, benchmark, and stress test, giving firms much deeper insight into their own risk profiles. Investment firms will be able to model how events will effect certain situations, for example, a shift in interest rates, or low wage growth, among many other things.

Technology will also ensure that clients have the best customer experience, and are able to provide the most accurate view of their financial lives, and thus receive the most accurate advice that best reflects their needs, while also cutting costs.
The firms that move on this first, and fastest, will provide better service to clients, have better customer experience, open the door to greater financial inclusion, be able to maintain profitability despite increasing fee pressures, and have the ability to grow fastest while providing the most accurate, compliant, smoothest customer service. They will also be at the forefront of the next wave that is seeded by the current, as the next wave of innovation will be a second order effect of the current toolkit. 

Christian Burgin, CFA








Christian Burgin, CFA, is the co-founder of Visible Capital, and volunteers his time to CFA UK's Scottish Committee 






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