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What will the financial advice
process look like in 2025?
iress.com
Chris Pitt, Head of Market AnalysisJune 2017
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Costs & charges are in the spotlight
MIFID II
AI & Machine
Learning
PSD2 &
Open Banking
Pension
Dashboard
Digital
Passports
Asset
Management
Market Review
FAMR
Robo
Advice
Advice
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FAMR
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The definition of advice
Regulated firms will be
giving advice only where
they provide a personal
recommendation
So, for example firms will be able to:-
1. Contact customers to let them know that they have not used their ISA
allowance in a given tax year
2. Provide information on the risk profile of the funds available within their
stocks and shares ISA
3. Highlight that a customer has never increased their pension contributions
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Advice vs. guidance
Advice
• Recommend what you should do
• You will usually pay a fee for “Advice”
• “Advice” will recommend a specific product or
course of action for you to take given your
circumstances and financial goals. This will be
personal to you, based on information you
provide
• “Advice” may be provided by a qualified and
regulated individual or through an automated
system from a fully regulated provider
• Providers of “Advice” are responsible and
liable for the accuracy, quality and suitability of
the recommendation that they make and you
are protected by law
Guidance
• Suggest what you could do
• “Guidance” is usually free
• “Guidance” will work with you to identify
your options and help you narrow down
your choices but will not tell you what to
do or which product to buy; the decision
is yours
• If necessary it will direct you to other
sources of help or suggest that you take
formal advice
• Providers of “Guidance” are responsible
for the accuracy of the information they
provide but not for any decision you make
based on it
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MIFID II
Key themes:
• Product Governance
• Suitability (advised)
• Appropriateness (non-advised)
• More reporting (client and regulator)
• 10% drop
• Independence
• Trading:- best execution, venues
• Better record keeping
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Asset Management Market Study
The market doesn’t exhibit the signs of competitive
pressures driving down prices so, is the consumer getting
value for money?
Proposed remedies:
• Asset managers accountable for value for money
• Independent fund oversight committees
• Clearer communication of charges and impact
• All-in fees
• Help for retail investors to select the best fund:-
o Greater clarity about the objectives of the fund
o Stronger reporting and use of benchmarks
o Tools to identify persistent underperformance
• Easier movement into better value share classes
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Pensions Dashboard
• 2 x prototypes built and shown
to HMT and industry
• Includes state pension
• Enthusiastic support from
providers and DB schemes
• Some push-back from smaller
private / Master trust schemes
• Questions to resolve around
commercials and governance
• Will the government mandate?
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PSD 2 & Open Banking Standards
Enabling the digitalization of financial services:
• Enabling banking data to be shared, analysed and used by
authorized third-party applications
• Enabling a more cashless society
• Enabling third-parties to initiate payment transactions
So what?
• Banking clients already asking for PSD2 enabled fact-finds
• New entrants / new services will analyse consumer banking data
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Digital Passport & ID
• Proves ID quicker / more securely than ID & password
• UK government has been using Gov.Verify for some years, e.g. tax returns
• Will be used to access the Pension Dashboard(s)
• UK government is targeting 25,000,000 in use by 2020
• TISA has developed an emulation for a Digital ID that meets FCA
regulations and AML requirements
• Enhancing banking transactions
• A key enabler for the digital economy
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7%
89Self serve
15
of wealth managers would like to pilot new digital toolsCapgemini’s World Wealth
Report 2016
Digital
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Digital
US research, incl. biometric testing, found consumers (aged 50-70) would prefer to deal with advisers via screen-share than
at face-to-face meetingsMoneyGuide Pro
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Robo
using Wealth
Wizards had been
“transformative
in terms of the
costs of advice”.LV=
• Full, regulated advice generated via
algorithms & business rules
• Scope includes pre-retirement, at
and in retirement and Investments.
Mortgage, Protection and debt
advice in pipeline
• Evolving marketing away from “robo-
adviser” to “robo-paraplanner”
• A Fintech company with a small
adviser business inside
• Using qualified advisers to enable
machine learning
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Machine Learning is already here
Ref: http://www.bbc.co.uk/news/uk-39657382
On your phoneSiri, Alexa and Cortana
are learning to recognise
your voice
In your
shopping basketRecommender systems
On your TV
Recommender systems
In your email
Automated filtering
On your
social mediaRecognising and
tagging photos
At your bankPreventing fraud by
spotting irregular
spending patterns
In scienceSpotting patterns in the
vast amounts of data
generated by the
Hadron Collider
In hospitalsHelping to spot cancer
and eye disease from
retina scans
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Potential UX in 2025 ?
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Why? What’s the problem?
Okay, perhaps I should. What do I
need to do and how long will it
take?
Hey, isn’t it time you reviewed your
finances?
Well, you could get a cheaper
mortgage, you're not saving
enough for your retirement and
Jane won’t have enough to
live on if you died tomorrow
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I’ll send you a list of financial advisers
within ten miles with a four-star rating or
better ranked by the fees they charge
Okay, how do I find a good
financial adviser?
Thanks, I’ll check a few out.
You have options:
1.Pay for a financial adviser,
2.Get some free guidance or
3.Do a lot research and reading
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A couple of days later…
ID proved
Decides to give “ABC Wealth Managers” a try……
But, what do you really want / need
from your money?
Fact-find pre-populated with bank
and Pension Dashboard data
ATR assessment
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Shortfall & optimisation
calculations
First-cut proposals
Suitability documents
Execution
Refined proposals
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“We always overestimate the change
that will occur in the next two years
and underestimate the change that
will occur in the next ten.
Don't let yourself be lulled into
inaction.”
Bill Gates
Thank you
iress.com
Email: [email protected]
Mobile: 07920 135708
Chris Pitt. Head of Market Analysis
LinkedIn: Christopher Pitt
Twitter: @chrispitt11