It’s frequently said it is far too easy to borrow money but financial regulation makes it far harder to save. A new service launched today gives clients the ability to save on impulse towards the long term financial goals agreed with their adviser.
Enabling impulse saving has been seen as something of a holy grail by many in the digital finance market for some years. The original Impulse Saver app, launched by Westpac in New Zealand (see here), received widespread acclaim. This was essentially a big red button on an iPhone app which when pressed could automatically transfer and predetermined amount up to $50 from a current account to a saving account. Whilst undoubtedly a great idea, information on how much has actually been saved this way is hard to find.
A similar service in the US impulsesave.com did, I understand, have a reasonable level of success before being absorbed into the betterment.com investment platform and then closed last year. The benefits of such services should not be discounted, for example Saved+, another micro savings service in the US, report their average user saving over $200 per month in this way. More than many British consumers manage at all.
In the UK an app called OrSaveIt has attracted some 10,000 users who are able to record situations where they have resisted the temptation to spend on impulse. This is not currently linked to any savings account or digital wallet. Founder Alain Desmier tells me he sees such connections as an important future objective.
The new offering from True Potential is designed to be used for one off, i.e. impulse transactions. It can accept top ups for as little as £1. The service is being deployed as part of the client website capability offered to all True Potential software users. Savings are made into the True Potential Wealth Platform and can be invested in either Isa or general investment accounts.
To use Impulse Save clients simply log on to the personal client website they can be provided with as part of the standard True Potential software. This takes them to an overview of their portfolio showing the amount invested and the change over the period that has been set as a default.
From this they select the full portfolio button which then produces a breakdown of a series of assets. To the right of each asset is a green icon labelled Impulse Save. By selecting the investment they wish to contribute to they are then taken to an Impulse Save overview screen.
At this point the system replays the current value of the account, the type of investment e.g. general investment account and the savings goal that has been set. The user is offered the option to select to save either a series of pre-configured amounts £10, £50, £100 £200 or whatever is needed to reach the full goal. Alternatively they can save any other amount from as little as £1.
After deciding how much they wish to Impulse Save users then select either to spread the amount equally across all funds or spread the additional contribution in the same proportions as the original investment. They then click to confirm the billing address and the details from the payment card from which the money is to be taken.
Following this a summary is presented replaying the account, current value of the account, type of account and Impulse Save amount. Also included is a declaration stating that by using the service the customer understands that they are topping up an existing investment they agreed with their financial adviser. The declaration identifies any initial commission the adviser has chosen to take for facilitating this transaction which technically is, for the amount being saved on impulse, non-advised. It also reiterates the agreed level of annual adviser charge the client has agreed to in respect of their investments.
To meet regulatory requirements a summary of Advice Charges and the necessary Key Facts Illustration Document are created and the user checks three boxes, to confirm they have understood the declaration and read and accepted both documents. Once the three boxes have been checked a “Make Impulse Save” button appears.
There are two things that are really different about this service. First True Potential have somehow cracked the challenge of how to make micro payments into a regulated investment product. Second this has been created in a way that entirely supports the adviser market. It has been structured to enable consumers to make additional savings contributions towards the explicit goals they have agreed with their financial adviser. In the past impulse saving solutions have invariably been designed to target consumers directly rather than for use in conjunction with their IFA.
Given the paperwork still required for single contributions by some life offices and platforms the ability for the end consumer to be able to make small top ups into a savings account with just a few mouse clicks is a huge leap forward. An iPhone version of the service is expected in the next month and this will be followed by a dedicated iPad version. In the meantime it can be accessed from mobile devices as all of the True Potential websites work on any browser.
This service offers another great way for advisers to incubate new customers who may not be able to afford financial advice on a regular basis but might start with some initial advice and goal setting and use ongoing advice once their savings have achieved a level where it can be justified.
Ian McKenna is director of the Finance and Technology Research Centre