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Ian McKenna: New technology sends a warning to IFAs and providers

Ian McKenna MM blog

Two weeks ago in New York, approximately 1,000 of the financial technology world’s leading minds got together for the Finovate Fall event to see the latest and brightest offerings aiming to transform the way financial services works.

In the interests of space, I have to limit my focus to a small number of those who presented over the two days.

Many organisations covered mobile payments security and authentication. There were so many in this category that I will not even attempt to list them all. Clearly, the device in your pocket looks certain to become a viable alternative to cash in the next couple of years.

Financial education or rather the lack of it is clearly a concern to everyone in the personal finance world and two companies PlayMoolah and Virtual Piggy showed some great solutions for teaching children how to set financial goals and save for things they want in ways that will give them a sound financial grounding and help them have a better appreciation of the value of money from an early age.

The conference included a significant number of offerings targeted at helping small businesses work more efficiently and more effectively. The highlight of these was the offering from ShopKeep with a package that can help even small local businesses offer an integrated physical and virtual shopping experience on a par with far larger businesses.

Yodlee the aggregation business that is behind so many leading-edge personal finance solutions, including notably the new web-based and mobile client service from True Potential and the client-facing aggregation being offered by Sammedia, showed their new services designed to do the same for small business as they have for individual consumers.

Thus far the fast majority of UK life, pensions and investment providers have not yet engaged with Yodlee although it does now have pretty much all the leading banks and any building societies large enough to bother with on board.

With an increasing number of adviser firms adopting technology which Yodlee support, I am beginning to feel those life offices and platforms not providing Yodlee integration are missing a major opportunity and I am currently exploring this in more detail.

UK based BCSG claimed it is now achieving a 40 per cent conversion rate when Barclays offer its package, marketed in the UK as My Business Works, offering five applications, including online accounting, a website builder, a business planning tool, a legal package and online back-up for a fraction of their normal cost.

Looking at this, I could not help but think for the UK, at least, an auto-enrolment tool should be added to this in the near future.

In last week’s Money Marketing | wrote about what for me was the most significant announcement of the show, the new 401K service from Personal Capital.

If brought to the UK, this would undoubtedly deliver an exceptional consumer service proposition at a price little more than Nest. This would present a huge challenge not only to the adviser community but also the ultra-low cost pension providers targeting the auto enrolment market.

Having seen technology from both Nest and Personal Capital it is a bit like comparing a bicycle with a Ferrari, they do both have wheels,the thing is this Ferrari is cheaper than the bike.

Other services worth a particular mention include LearnVest a personal finance and lifestyle website which last year launched a range of personal financial management tools and has already helped over one million American women in managing their finances.

They have now employed 50 certified financial planners to fuse digital planning with personal advice and are offering a range of fix priced advice services from $89 to $550.

I believe this organisation demonstrated what can be done if you mix the best of technology based services with personal adviser interaction and is an outstanding example of the future of financial advice.

Money Desktop demonstrated an outstanding user interface for personal financial management that is genuinely fresh exciting and interesting. Exactly the sort of approach needed to engage consumers. Impulse Save showed ways in which we can make it as easy for people to save as it is to spend and showed valuable ways to change consumer behaviour.

In the mortgage market, Mortgage Harmony offered an arbitrage approach to renewing borrowers product that could help lenders retain vast amounts of assets and would appear to have much to offer the UK as well as the US market.

The real winner from just about everything demonstrated at Finovate Fall is the consumer while it sends a very direct message to the advisers and investment providers.

Many organisations are building a wide range of different solutions to enable consumers to be able to get a far better understanding of their personal finances and take control of their money for a fraction of the cost and in far less time than in traditional methods.

This identifies that any organisation re-engineering their business just to address the needs of RDR, is building a Concorde just after the first flights of a 747, in all probability in the future real money will be made out of delivering low-cost services to those who have not previously been able to afford them although doubtless there will be some still prepared to pay a high price for exceptional service.

What is in question is if that will be sufficient to run a profitable business?

The Finovate caravan moves to Singapore next with the first ever Finovate Asia on November looking at the latest leading-edge financial technology from the fastest-growing continent in our world. Personally, I am really excited by this and I will be there on the day tweeting all the latest news from @ianmckennaftrc and reporting it subsequently in more detail in Money Marketing.

Ian McKenna is director of the Finance & Technology Research Centre


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