Over my last two columns I have looked at ways in which our industry could substantially enhance consumers’ understanding of their financial products and the benefits they deliver. These present enormous opportunities.
This week I want to look at an FCA initiative which is well intentioned but could, I believe, severely constrain competition and innovation in the personal finance market.
I refer to the proposal that the FCA should build a pensions dashboard to enable consumers to see all their retirement savings in a single place. There is no need for the regulator to deliver such a service as a wide range of solutions are emerging which can fulfil this role. Aon, MoneyHub and True Potential, to name just three, already provide potential solutions to this need.
They will be joined very shortly by Intelliflo with its Personal Finance Portal 2 and I am aware of many similar services in development by a wide range of other organisations. Consequently, there is absolutely no need for the financial services equivalent of a single NHS IT project, as the private sector is already creating a plethora of such solutions.
What we do need to see is action to ensure all organisations with long-term savings contracts in force are compelled to provide consumers with the information they need in a format they can use.
Rather than seeking to compete with the industry, I believe the FCA can play a very valuable role in ensuring all industry players deliver to consumers the information they need to benefit from the emerging services.
A few weeks ago I looked at how the Government has been highly effective in using the Enterprise and Regulatory Reform Act to cajole banks into supplying the data customers need to enable effective comparison of their products.
Taking the same approach to savings, investment and life assurance would deliver the equivalent consumer benefits.
Research by B&CE demonstrates huge demand for such services from consumers, with over 75 per cent of pension investors reacting positively to the idea of a website where they could see all their pensions in one place. More than two out of three would welcome a site where they could see all their finances in a single place.
These views hold up across a range of demographics, including the 55-65 age group, who are so important to reach in relation to pension freedoms.
As I see it, those advocating the FCA dashboard want the regulator to produce it because they see it as a way of someone else providing information and services, rather than building them themselves. Such short-termism will be extremely damaging in the long run.
The establishment of an FCA or other government-backed pension portal would be a major step towards nationalising the UK savings industry and would significantly undermine the ability to compete by differentiating our offerings.
Nest is now a major competitor to mainstream pension providers, yet it need never have been created if the provider community had agreed to find a way to support micro employers. Let’s not make the same mistake again with a pension dashboard.
I expect half the current life, pension and platform providers to disappear over the next decade because they fail to become truly digital businesses. Asset and wealth managers look to be even more exposed as failure to invest will leave them cut off from distribution and customers.
Creating a central portal will further discourage such organisations from making essential investment.
Establishing a single pension dashboard would also be hugely damaging to the UK economy. London is now recognised as the global centre for fin tech investment. Recent research by Startupbootcamp.com identified that last year it was worth no less than £20bn to the UK economy.
The same study identified that no fewer than 48 per cent of respondents believed financial inclusion or wealth management to be the optimal targets for the next round of fin tech start-ups. Faced with a Government competitor, the supply of private equity and venture capital to such organisations would almost certainly dry up, forcing these innovators and the jobs they create to relocate overseas.
Rather than put control of our customer experience in the hands of the regulator, the industry should press for the extension of the E&RRA to include all forms of long-term savings and life assurance. We should embrace services built around it so we can give customers the information they need, wherever, whenever and however they want it.
Ian McKenna is director of Finance & Technology Research Centre