Putting Open Finance to work in wealth management
Open Finance, as the name suggests, opens up a world of new possibilities for financial services. And there’s an argument to be made that nowhere is this more the case than in wealth management.
We have said before that wealth managers have been slow to seize the opportunities, but this is changing and at Moneyhub we now service an array of clients in the wealth sector, platforms and wealth managers, providing technological infrastructure, API connections and expert advice.
Open Finance builds on the foundation and legacy of Open Banking, which has shaken up the world of current accounts and payments by opening up data for regulated providers to access and share, subject to customer consent. Open Finance extends those data-sharing principles to consumers’ entire financial footprints, including mortgages, savings, pensions, insurance, investments and so on.
What this means in practice is consumers can access their financial data through trusted third parties, like Moneyhub, which, armed with a full picture of a client’s assets and liabilities, can help offer super-personalised products and services.
Value Exchange
There is a real value exchange here. Consumers benefit from holistic and insight-driven services, and providers gain, in terms of lower customer acquisition costs, lower cost business processes and compliance dividends. As the regulator presses forwards with its Customer Duty initiative, Open Finance will play an important role in supporting firms going above and beyond current Know Your Customer and Treating Customers Fairly standards.
Just take onboarding of new clients: Instead of the manual data collection processes of old, wealth managers can set up an Open Banking authorised request to pull client contact and identity information from banks. Then, instead of trying to collate and make sense of client data scattered across multiple advisors and systems, with their client’s permission, advisors via Open Finance (including contract enquiry, API connections and screen scraping) can access all their investment portfolios in one place - all via a single API or as part of a white label solution.
Gathering income, expenditure, assets and liabilities together, wealth managers can accurately assess the client’s capacity for loss, the suitability of products and have a system to continually monitor any changes in circumstances. This analysis can be at single client level or household level - in fact any connected parties acting by consent. They can choose to share information with accountants, solicitors and advisors and can monitor vulnerable family members' financial affairs.
Financial Transfer
A new generation of investors are due to inherit around £5.5 trillion from their parents and have largely dismissed traditional wealth services as being out of touch with their digital-first, user-friendly and environmentally conscious needs.
We support advisers that are trying to reach a younger audience, through budgeting tools, rent recognition and sustainable investing etc. As one example of our work, we are partnering with The Big Exchange, an online social, environmental and impact investment platform co-founded by The Big Issue, to help it grow positive impact savings and investing products.
The partnership will allow The Big Exchange to use our Open Finance technology to promote relevant sustainable investing options, a digital wallet and a marketplace of complementary services, supporting a greener lifestyle.
‘Datahub’
Another area of expertise for Moneyhub and value-add for our wealth management clients is our data-based insight.
Our name, Moneyhub, neatly encapsulates who we are and what we do: We serve clients from across the finance industry and provide an unrivalled quantity of connections. But that is not the complete picture: In addition to API connectivity, Moneyhub also excels in analysing, categorising and enhancing data.
We use machine learning to improve accuracy and to provide a base from which we can generate fact-based, arithmetic and behavioural nudges that deliver value to both wealth managers and their clients.
We are the market leading Open Data platform, and it’s our Open Data expertise that enables personalised digital experiences and smart insights. We act as essentially a single point of integration for data from a variety of sources, and then we layer on top of that the ability to transform that data into customised offers and services.
ARQ
Take wealth management fintech ARQ as an example. Instead of simply offering clients visibility on what funds and investments they hold, ARQ also wanted to provide information on the fees they are paying, the returns they are receiving net of charges and to benchmark holdings against ESG ratings.
Fund data feeds don't always include ISIN codes, so we developed a way to identify funds by taking certain key data points, such as unit price, and cross referencing against Morningstar data to disambiguate. This unlocks the ability to identify the key holdings within a fund and the ESG profile to highlight the green-ness of a portfolio or specific investment.
Growth Area
Wealth management has been a significant growth area for Moneyhub in 2021. Firms are beginning to see the use cases for Open Finance data to improve the personalisation of service, cut processing costs and improve the suitability of propositions. Interest has built across the sector including investment platforms, DFMs and adviser-led firms.
Open Finance and the data it surfaces is increasingly seen as a vital component of digital transformation and differentiation in a competitive environment. As remote interaction looks set to grow in 2022 and beyond, the ability to build on an Open Finance platform will be the difference between surviving and thriving.
Find out more about the IMpower Incorporating FundForum 2022 event and agenda here >>
