Today most investors see their financial picture in fragments, with little connection between their short-term savings and longer-term vehicles such as a pension.
For many, a financial adviser can play an important role in bringing this together and helping people see a fuller picture of their wealth. However, professional advice is still not necessarily accessible to the mass market.
Open Banking could play a role in bridging this gap and in empowering more investors to take control of their financial situations.
More than just banking
At a recent roundtable hosted by Bravura, participants discussed how the new rules could help provide mass market investors with better information and analysis of their finances, ultimately helping them to make better decisions with their money.
Some industry commentators believe that the new rules will also allow consumers access to better deals on mortgages, savings and other financial products.
David Brown, Group Director of Strategy and Innovation, B&CE said: “We can play a part in helping our customers understand their finances. If part of their finances is in a bank we can help them, through the use of APIs and Open Banking, pull-in that part of the picture. This will allow us to give members a better end to end experience.”
By giving providers more access to our data they can gauge a better understanding of our financial habits and needs. This in turn should mean that, in theory, Open Banking data could provide better, more personalised product suggestions. Not only should this mean a higher quality of product is being offered to consumers but it should subsequently also help cut out some of the time-consuming research involved in searching for best of breed deals and services. A company who has access to your data through Open Banking will be far better equipped to show you a product that will work for you. This can only benefit the consumer and will hopefully push up competition in the industry.
What are the risks of customers seeing this data?
However, participants at our roundtable also discussed a potential risk associated with showing people their short and long-term savings alongside one another.
It’s important that investors maintain a long-term perspective and appreciate the importance of saving and later life planning. There is a danger that when bringing in information via Open Banking, and presenting investments alongside cash holdings, that this may lead to a prioritisation of short-term savings.
Participants also warned that, while it’s important that people engage more with their pensions, seeing and measuring movements on a daily basis is not necessarily a good thing – unless this is coupled with appropriate education around the importance of a long-term investment perspective.
Graham Cross, MD and CEO, Helm Godfrey Partners said that: When trying to encourage people to invest for the long term we are not necessarily wanting to encourage them to look at what their pension is worth on a day to day basis.”