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Ian McKenna: Open banking blows pension dashboard potential out the water

With the dashboard fast becoming a dead duck, advisers must look at other ways to provide clients with a detailed view of their financial affairs

If the pensions dashboard project is to be hijacked by the new single guidance body – as looks likely – what other options do advisers have to provide clients with a detailed view of their financial affairs?

Talk emerging from the House of Commons suggests the dashboard will become the equivalent of a Blackberry in an iPhone enabled world.

I hope I am wrong in my prognosis but the Department for Work and Pensions command paper to the House of Commons, originally due in March, has worryingly slipped into quarter two.

If Frank Field and the rest of the work and pensions select committee get their way, the dashboard will be another disastrous government IT project that will consume tens of millions of pounds before it is inevitably killed off.

Ian McKenna: The pensions dashboard is heading for disaster

But there is hope for financial services. While the pensions dashboard is fast becoming a dead duck, open banking offers a huge opportunity.

Already up and running, it could complement the existing online services offered by so many life companies and platforms. That said, the governance is currently dominated by the banks, so these players must lobby hard to be represented in order to move towards a concept of open personal finance more broadly.

In the meantime, there are ways advisers can benefit from it.

Our recent “Making Savings Affordable” study identified some 3.5 million households in the UK with a surplus of more than £2,000 per month of income over their committed expenditure. This equates to approximately 150 households for every adviser in the country.

If the entire supply of face to face advice is, theoretically, taken up by these 3.5 million families, how will the industry support the 13.5 million households with between £200 and £2,000 per month surplus income from which they can save?

It is often said data is the new oil, so open banking data must surely be the richest field we can drill into. The new regulations make this possible.

Banks have fought hard over many years to restrict this valuable information being accessible to anyone but themselves. There is a reason the Competition and Markets Authority was given the job to enforce the top nine UK banks to roll it out.

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Banks could have been using this information to give customers better insight into how they manage their money for well over a decade but have chosen not to. Giving them such an opportunity would have reduced the amount they wasted on unnecessary credit, which would have hurt bank profits.

For advisers, such data can go towards helping clients save more, providing it will encourage them to engage on a more regular basis too.

This could pave the way for different types of client interaction. For example, rather than providing a six-monthly statement and holding a face-to-face meeting, the aggregated information could be delivered regularly via an app, with brief screen share calls scheduled every few months depending on the agreed service level. Such calls can be easily recorded to provide a compliance record. So, there are huge opportunities for the advice community to support millions more in new ways using technology.

While I am amused by Smart Pension’s recent suggestion that delivering information to savers via an avatar is its original idea (despite Aviva offering such a service nine years ago) it is right about the fact we need new ways to engage consumers.

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Long-term saving is something consumers know they need to do but they struggle with it. Giving them the capability to analyse their day to day spending will have an immediate impact in capturing their attention and start them on the path of budgeting more effectively.

It can also support a key part of the advice process: demonstrating affordability.

For some time, Intelliflo and True Potential have offered personal financial management capability – the precursor to open banking – as part of their software. All practice management software suppliers should now be building in similar functionality as a matter of urgency.

Although banks have been dragged kicking and screaming to open banking, advisers and pension providers should see it for what it is – a huge opportunity to help millions of consumers save more. That should be a great way to grow their businesses.

Ian McKenna is director of the Finance & Technology Research Centre

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