What will the financial advice

process look like in 2025?

iress.com

Chris Pitt, Head of Market AnalysisJune 2017

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Costs & charges are in the spotlight

MIFID II

AI & Machine

Learning

PSD2 &

Open Banking

Pension

Dashboard

Digital

Passports

Asset

Management

Market Review

FAMR

Robo

Advice

Advice

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FAMR

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The definition of advice

Regulated firms will be

giving advice only where

they provide a personal

recommendation

So, for example firms will be able to:-

1. Contact customers to let them know that they have not used their ISA

allowance in a given tax year

2. Provide information on the risk profile of the funds available within their

stocks and shares ISA

3. Highlight that a customer has never increased their pension contributions

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Advice vs. guidance

Advice

• Recommend what you should do

• You will usually pay a fee for “Advice”

• “Advice” will recommend a specific product or

course of action for you to take given your

circumstances and financial goals. This will be

personal to you, based on information you

provide

• “Advice” may be provided by a qualified and

regulated individual or through an automated

system from a fully regulated provider

• Providers of “Advice” are responsible and

liable for the accuracy, quality and suitability of

the recommendation that they make and you

are protected by law

Guidance

• Suggest what you could do

• “Guidance” is usually free

• “Guidance” will work with you to identify

your options and help you narrow down

your choices but will not tell you what to

do or which product to buy; the decision

is yours

• If necessary it will direct you to other

sources of help or suggest that you take

formal advice

• Providers of “Guidance” are responsible

for the accuracy of the information they

provide but not for any decision you make

based on it

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MIFID II

Key themes:

• Product Governance

• Suitability (advised)

• Appropriateness (non-advised)

• More reporting (client and regulator)

• 10% drop

• Independence

• Trading:- best execution, venues

• Better record keeping

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Asset Management Market Study

The market doesn’t exhibit the signs of competitive

pressures driving down prices so, is the consumer getting

value for money?

Proposed remedies:

• Asset managers accountable for value for money

• Independent fund oversight committees

• Clearer communication of charges and impact

• All-in fees

• Help for retail investors to select the best fund:-

o Greater clarity about the objectives of the fund

o Stronger reporting and use of benchmarks

o Tools to identify persistent underperformance

• Easier movement into better value share classes

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Pensions Dashboard

• 2 x prototypes built and shown

to HMT and industry

• Includes state pension

• Enthusiastic support from

providers and DB schemes

• Some push-back from smaller

private / Master trust schemes

• Questions to resolve around

commercials and governance

• Will the government mandate?

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PSD 2 & Open Banking Standards

Enabling the digitalization of financial services:

• Enabling banking data to be shared, analysed and used by

authorized third-party applications

• Enabling a more cashless society

• Enabling third-parties to initiate payment transactions

So what?

• Banking clients already asking for PSD2 enabled fact-finds

• New entrants / new services will analyse consumer banking data

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Digital Passport & ID

• Proves ID quicker / more securely than ID & password

• UK government has been using Gov.Verify for some years, e.g. tax returns

• Will be used to access the Pension Dashboard(s)

• UK government is targeting 25,000,000 in use by 2020

• TISA has developed an emulation for a Digital ID that meets FCA

regulations and AML requirements

• Enhancing banking transactions

• A key enabler for the digital economy

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7%

89Self serve

15

of wealth managers would like to pilot new digital toolsCapgemini’s World Wealth

Report 2016

Digital

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Digital

US research, incl. biometric testing, found consumers (aged 50-70) would prefer to deal with advisers via screen-share than

at face-to-face meetingsMoneyGuide Pro

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Robo

using Wealth

Wizards had been

“transformative

in terms of the

costs of advice”.LV=

• Full, regulated advice generated via

algorithms & business rules

• Scope includes pre-retirement, at

and in retirement and Investments.

Mortgage, Protection and debt

advice in pipeline

• Evolving marketing away from “robo-

adviser” to “robo-paraplanner”

• A Fintech company with a small

adviser business inside

• Using qualified advisers to enable

machine learning

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Machine Learning is already here

Ref: http://www.bbc.co.uk/news/uk-39657382

On your phoneSiri, Alexa and Cortana

are learning to recognise

your voice

In your

shopping basketRecommender systems

On your TV

Recommender systems

In your email

Automated filtering

On your

social mediaRecognising and

tagging photos

At your bankPreventing fraud by

spotting irregular

spending patterns

In scienceSpotting patterns in the

vast amounts of data

generated by the

Hadron Collider

In hospitalsHelping to spot cancer

and eye disease from

retina scans

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Potential UX in 2025 ?

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Why? What’s the problem?

Okay, perhaps I should. What do I

need to do and how long will it

take?

Hey, isn’t it time you reviewed your

finances?

Well, you could get a cheaper

mortgage, you're not saving

enough for your retirement and

Jane won’t have enough to

live on if you died tomorrow

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I’ll send you a list of financial advisers

within ten miles with a four-star rating or

better ranked by the fees they charge

Okay, how do I find a good

financial adviser?

Thanks, I’ll check a few out.

You have options:

1.Pay for a financial adviser,

2.Get some free guidance or

3.Do a lot research and reading

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A couple of days later…

ID proved

Decides to give “ABC Wealth Managers” a try……

But, what do you really want / need

from your money?

Fact-find pre-populated with bank

and Pension Dashboard data

ATR assessment

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Shortfall & optimisation

calculations

First-cut proposals

Suitability documents

Execution

Refined proposals

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“We always overestimate the change

that will occur in the next two years

and underestimate the change that

will occur in the next ten.

Don't let yourself be lulled into

inaction.”

Bill Gates

Thank you

iress.com

Email: Chris.pitt@iress.co.uk

Mobile: 07920 135708

Chris Pitt. Head of Market Analysis

LinkedIn: Christopher Pitt

Twitter: @chrispitt11