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A new playing field: Open Finance and wealth management

By Mark C. Trousdale, Chief Growth Officer of InvestCloud

Every person, regardless of income or wealth, should have clarity around and access to tools about their financial wellbeing. Furthermore, it’s times like these that make it so apparent why financial inclusion is more important than ever. And as we look around the global landscape we are beginning to see signs of things moving in the right direction. Open Finance is one of our opportunities to make strides, not only with the greater audience who need to be included, but also within wealth management and high touch service offerings.

The FCA’s recent collection of industry input on Open Finance opportunities highlights the gravity behind this and provides promise that it will gain momentum.

At its core, the promise of Open Finance relies on access to data: better access and increased ease of access in a more controlled fashion; better data analytics; and better consumer engagement. It extends the idea of Open Banking that is already in force to a wider range of financial data, including savings, insurance, lending and investments. This would mean creating appropriate data-sharing protocols and agreement mechanisms across more firms, accounts and data types than currently covered by Open Banking. Some of the key benefits the FCA are reviewing include greater competition, improved innovation, better decision-making and the reduction of friction.

In wealth management, it is certainly a powerful concept that will help investors more easily share information with their wealth managers. This would streamline discovery, fact finding and know your customer (KYC) process. But while many of the benefits may be clear, the leap from data-sharing to better results is one that isn’t getting a lot of attention. It’s worth considering the data approach that makes this all possible – data control – and the analytics and engagement approaches that are required to synthesise real results for investors.

Data collection

Mark C. Trousdale
Mark C. Trousdale

The first principle of data collection is holistic data integration. This means integrating data from across a wealth managers’ own systems, service providers, market data sources and investors’ uploaded documents. But holistic data integration needs to be reliable. This means going direct instead of relying on screen-scraping. Open Finance provides a model for real aggregation.

But whether data is gathered via direct files, interfaces, account aggregation services or Open Finance APIs, the data collected needs a secure place to be aggregated and control processes around it. In order to use the data in a meaningful way which empowers the manager and informs the engaged client, an open-architecture digital warehouse is paramount.

The digital warehouse needs to be able to ingest, manage and safekeep large and complex data sets from various sources, liberating wealth managers from reliance on a single system or service provider. Open-architecture digital warehousing also means handling structured and unstructured data with ease. This includes valuations, transactions, prices, market data and the like, alongside documents, content and social media, all well organised and fully aware of the time dimension of data.

Amplified-intelligence analytics

Once the data is available and managed in a secure and controlled fashion, providing value-add insights to clients requires augmented analytics mined from the underlying data. The most efficient approach for providing these insights is to apply amplified intelligence.

Examples of amplified intelligence include the capturing, storing and surfacing investor online behaviours through a degree of digital engagement. This is provided to the adviser in order to give opportunities for advisers to form better opinions about how to serve clients. Another example is automatically assessing data captured in the digital warehouse to calculate and surface next-best actions. This could take the form of goal recommendations based on market conditions and investor-specific preferences.

These are but two examples of what can be done with data once it is gathered and analysed in a rigorous and controlled fashion.

Digital engagement

Data availability and analysis is only part of the equation. It is just as critical to focus on providing advice and wealth management services in a way that attracts and empowers investors and clients.

The basic principles of a strong client portal experience need to be fulfilled. These are intuitive and beautifully designed apps, easy to use and access anytime, anywhere on any type of device. Clients should be able to interact with their wealth manager, send secure messages or request a quick video call, view account information, track their private assets and see a consolidated view of all accounts, including those held away. The portal should store and organise life’s important documents, and allow investors to consume curated content, watch trending videos, build goals and make confident decisions alongside their advisers.

To truly enrich their clients’ experience and offer them meaningful engagement, wealth managers should ensure they employ behavioural science theories and personalisation throughout their portal. This will help tailor the digital experience, create the right persona and draw clients in while building digital empathy.

At its heart, digital engagement is all about understanding and responding to the psychology of clients in an online arena. The right technology enabler will provide the means to collate pertinent data and establish a digital experience that is highly intuitive, involved and individual.

Assuming the FCA move forward, Open Finance is certainly set to change the process and governance of data sharing for the better. But wealth managers would be well advised to do the basics of digital well, even in a pre-Open Finance world.