Written by Mark Cotter, Guest Blogger on Tuesday 22 December 2015
Like most people of my age cohort, or as we are now most often referenced - ‘Millennials’ I have a very keen interest in both technology and in ‘the future’. Unlike the younger generations who have grown up imbedded with modern technology, we millennials have a fairly unique vantage point in being not only heavy users of this technology - but also, being able to remember the world without it. It is for this very reason that I still go to a book shop to buy a Christmas present, but then get out my smartphone and order the book from Amazon (we are a confused bunch sometimes!). But having this one foot in the technological past and the other in the present does give us a distinct perspective on the changes we see – and want to see – for the future.
This fact actually helps demonstrate the sheer speed of technological change (as predicted by Moore’s law), in that a young adult today who walks around with his smartphone, effortlessly connected to work, emails, his friends on social media, streaming music or watching live sport on his mobile was once - and crucially not so long ago - taping music from the top 40 whilst watching one of 4 television channels and waiting to use the landline to call his friends! The change has definitely been rapid – and the speed of change is increasing.
So with this in mind, and with Christmas and the dawn of a new year now firmly upon us, it did make me stop to think of all our modern gadgets today and how ‘futuristic’ exactly we are in terms of the financial technology we now employ. As well as also thinking where this all might be taking us in the Future. I mean surely with all our fancy smartphones, wearable technology, social media and electric (and soon to be self-driving) cars, the world of investing and financial technology, or ‘Fintech’ – that must be pretty advanced as well surely….right? Well let’s take a look and see.
Now the most shining example of modern financial technology affecting the greatest number of ordinary investors is surely the Wrap platform/Fund Supermarket which now takes the lion’s share of all retail investor money and is the tool of choice for the DIY investor and the financial adviser alike. And why not, online access 24/7, research tools, online statements, tax planning all now available to a client and his or her adviser at a click of a few buttons. Full custody of funds and assets, benefits of aggregation and efficiency driving down costs and the ability to link up your financial adviser and DFM all in one place – openly and with transparency for all parties. Pretty advanced stuff hey?
But how ‘futuristic’ or modern is actually all of this when you peel back the shiny web front ends and look at what is going on beneath ‘the bonnet’. Well not very I would dare to venture.
We still live in a world where transactions, cash and assets all travel on multiple channels and to separate institutions. Where there are long delays in terms of settlement when buying or selling investments. Where cash is moved from client to platform and then to fund manager before contract notes are sent back to the platform. Where money sent to and from platforms takes days to clear, where transfers take weeks, death cases take months and where cancellation notices and end of year statements are still posted (and lost).
And throughout this tortured process, personal information is continually keyed and re-keyed on various sources and devices. Investors’ details are held on dozens of different websites and portals all requiring the user to remember passwords and usernames and none of them able to ‘speak’ to each other and share data. We tend to accept these kind of things as inevitable but I can’t help but think that in years to come we will look back and see this as all very old fashioned and quaint… the way we view paper share certificates and letters and fax machines today. Indeed the next generation (Generation Z) who are coming to age now will see most of this as incredibly archaic.
So what do I see in my platform crystal ball? To start with, rather than platforms, I see an ‘internet of Fintech’. A closed but singular system where all investors place funds, make investments and live their financial lives. A place where we upload all of our financial data and from that shared virtual vault everything else can flow effortlessly.
We often think today about our online profiles but primarily in terms of social media; what we do and say on Twitter and Facebook; who our friends are; what we ‘like’ and what we don’t. Perhaps in the future we will regard our financial profiles in a similar way.
I imagine one place where we can see all our financial data and our ‘financial profile’, where advisers, banks and providers link in to create a global marketplace of products tailored to me. This hub wouldn’t need to be a cumbersome centralised piece of infrastructure but rather a federated and cloud based model of components that all ‘slot together’ thanks to established standards - an approach the DWP actually favoured in their recent discussions on pot-follows-member. Think iPhone and the app store versus a 1980s mainframe computer!
No more lengthy application forms or passing tests to secure an investment or borrow money – as all your personal details are already available. Transactions and applications would be lightning fast. Providers can just take the information digitally and make decisions instantly and automatically.
Around this core hub or internet of Fintech, there will be a range of ‘bolt on’, pay-as-you-need services. If you need an IFA to manage things for you – no problem, he is plugged in to the Hub as well and you can grant him access to your finances and away you go. Prefer a Robo Adviser? – again no worries, pick one and click ‘go’. Ditto for DFM or FM services.
Your bank, your employer and even HMRC are all ‘plugged in’ to this virtual hub too, giving anyone you trust access to your financial information and enabling instant updating of details, pension contributions, tax returns and the list goes on and on.
This might all seem a bit fanciful but we are already seeing moves towards technology increasing openness and creating a financial ecosystem where the client chooses where he or she goes, rather than the big banks and institutions setting the rules. This move towards openness and inter-operability is something we at Altus have always been very passionate about.
Peer to Peer lending, crowdfunding and other forms of alternative finance have exploded in recent years and look set to continue growing, upsetting the current global financial order in the process. Robo and simplified advice propositions are already looking to connect clients to their investments more directly and seeking to service the post RDR advice gap. And further into the future blockchain technology looks sent to massively disrupt the current model of moving money around the financial system.
All these advances point to a technology future that is not only client centric but based on speed, portability, openness and inter connectivity. All of which will only really be possible if we can allow ourselves to imagine a national or even global marketplace where all financial transactions and information interact. A ‘Fintech internet’ where all clients, providers and agents are connected.
Just imagine a world where you may never be asked to fill in a form or list off all your financial details again….to that I say personally, the future cannot come quick enough!