When Barclays closed its advice arm in January 2011, many on the IFA side of the industry were quick to celebrate what they thought was the bank’s exit from the advice market. Personally I always felt that reaction was more than a little premature. Even at the time there was evidence that this was not so much Barclays surrendering in the advice market, more a matter of it making a tactical retreat to regroup. Even at the time, the evidence was there to see if you looked. For example the bank continued to work with Focus Solutions on a technology offering that already integrates with Barclays’ online banking system.
Against this background I was in no way surprised by this week’s announcement at the Finovate Asia conference in Singapore that the bank is to offer online personal financial management software to its 4.5 million customers, starting in January. Speaking to me at Finovate Asia, Barclays head of social media platforms and servicing, digital banking Simon Shorey outlined the bank’s strategy to use personal financial management as a key tool to enable customers to take greater control of their personal finances and have a better understanding of the impact of day to day financial decisions.
The initial release of the software, which will first be offered to the bank’s Premier customers in December, individuals who would invariably be right in the middle of any IFA’s target customer audience, will comprise five elements. A spending and income tool, the ability to categorise expenditure so that payments to different retailers will be allocated to different parts of a client’s budget summary, budgeting tools which will allow customers to measure their actual expenditure in given areas, the ability to set up savings goals and allocate money from saving accounts towards specific objectives and income versus expenditure analysis. This will all be fed directly via the bank’s online banking system and pre-populated to the personal financial management system.
The second phase of the service will give consumers access to a financial calendar capability to allow them to identify where larger lump sum expenditure will occur over an 18 month period, the ability to set e-mail or SMS alerts should customers exceed their allocated budgets in any area, a “my net worth” summary allowing the customer to create a wider asset and liability statement by entering a wider range of financial information and a “people like me” component which will enable consumers to compare their own situations against peers. This is a technique that is increasingly seen as an effective way of nudging consumers towards financial decisions
A third release will include a range of tools designed to allow customers to plan for long-term life events. Whilst Shorey would not be drawn on the details of what such content might include, having spent much of the last three months studying how personal financial management tools of this type are being used elsewhere in the world, this will almost inevitably include consumer-facing financial planning tools that will cover exactly the range of issues normally addressed by IFAs. At the same time as delivering these tools, Barclays will be extending the scope of its online services to aggregate a wider range of its products so that customers will be able to view a far wider range of Barclays products such as mortgages, credit cards and investments via their online services.
The new service will be delivered using software from Strands Finance, a leading personal financial management software supplier with offices in San Francisco and Barcelona, which already makes PFM technology available to over 10 million customers of other banks such as ING in the Netherlands, BBVA in Spain, PostFinance in Switzerland and Bank of Montreal in Canada. The Barclays announcement was in fact made as part of the Strands Finance presentation at Finovate and whilst my detailed analysis of the Asia event will appear in my next regular Money Marketing column, the company gave one of the outstanding illustrations of how they can deliver enormous consumer value through the use of technology. Strands chief executive Edward Chang shared with me a view that PFM technology will increasingly be used as a key tool through which consumers plan their financial future. If tools like this can be accessed free of charge, in a post-RDR world it can only drive up what consumers will expect of advisers to whom they will pay fees.
A service like this is not, on its own, a direct replacement for financial advice, but it is reasonable to expect that banks like Barclays will use digital delivery to provide significant value-added services to their clients. Exactly this type of personal financial management software is being used as the cornerstone for many of the next generation advice propositions that are emerging elsewhere in the world and are drastically reducing what consumers need to pay to get professional advice. It is naive to believe that similar services will not emerge in the UK.
I have increasing evidence that this will happen here and much sooner than many in the industry think. Any adviser firm that is not able to provide equivalent services will inevitably look like an under-resourced poor relation. This announcement demonstrates why it is crucial for advisers to put technology at the heart of their customer service proposition in a post-RDR world if they are to maintain a competitive advantage.
Ian McKenna is director of the Finance & Technology Research Centre