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Making the most of fintech and regtech

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The client journey is changing rapidly. The rise of financial technology and its low cost of entry represents a great opportunity for our industry. You only have to look at the likes of E-Vestor, Advicefront and Wealth Wizards to see how the advice and planning proposition has already changed.

Regulatory technology is also increasing in importance. “Regtech” works to ensure retail advice firms’ service propositions are aligned within the FCA’s regulatory and risk management frameworks.

All advice firms, big and small, need to design a client framework that takes into account the benefits of both fintech and regtech.

As the below diagram shows, client engagement is moving towards a “cyber” service proposition. Such offerings integrate technologies to provide information, guidance and/or advice that helps people make informed decisions about their needs.

Clients tell us they want two principle issues covered via technology:

  •  An answer to the “what is in it for me?” question. Essentially, they want to be told they will be ok. This can be done using cash flow modelling, for example, or integrating risk profiling via attitude to risk technology.
  •  Value for money. Ensuring a service that is tailored to their needs, and easy to access and understand, is crucial.

When it comes to client experience, there are a number of areas where technology can make a difference:

  • Social media: This allows the firm to mine engagement data, and enables the client to receive timely and informative messages.
  • On demand: Clients should be able to join in on their service whenever they wish.
  • Joined-up approach: Clients demand a joined up approach, which brings together online and offline services.
  • Do-it-yourself: Some clients will wish to self-invest.
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Artificial intelligence is the next big game-changer. Firms will soon be in a position to offer propositions where clients are able to engage 100 per cent digitally until they decide they want to “phone a friend” and click a button to speak to a qualified professional.

The good news is investors tell us they still value the human touch, especially when they have big life event decisions to make, such as a house purchase or inheritance tax planning.

So where does regtech fit into this? Well, certain platforms can benchmark good practice, incorporating the FCA Cobs suitability directives maps, associated discussion papers and final guidance. This means firms can assess where they sit against their peers, as well as against the rulebook.

Regtech means firms can stress test new service design against the rules. It means they will receive detailed management information and risk reporting, they can ensure compliance data and market trends are assessed and recorded, and comply with all fraud prevention requirements.

Essentially, regtech can assess and manage all conduct risk metrics across client engagement and suitability rules, and fintech makes it all look simple.

Chris Davies is managing director at Engage Insight

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