Three technology megatrends set to shape financial services and advice – Money Marketing

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As financial advisers you want do best for your clients and from a business perspective you want to do it in the most efficient and cost effective way possible. That’s common sense.
From a technology perspective, typically, there are two ways these have been achieved to date. One is using ‘best of breed’ technology – pairing platform and provider services with independent technology solutions selected by individual advice firms. But we know that an ongoing bugbear for financial advice firms is making those different systems work together. More often than not they don’t, or at least not very well. This creates its own inefficiencies.
The more common alternative has been the ‘one-stop-shop’ approach, what we now refer to as a ‘closed ecosystem’, where a provider develops and offers everything the adviser needs as part of their proposition. This all-in-one type of proposition requires huge amounts of capital and resource to maintain – and both have been important for getting us to where we are currently.
But imagine this: You, as a financial adviser, use a basic platform which provides a set of core functions, and all the other functionality you could possibly want or need to run your business and serve your clients is immediately available as an app – or rather apps. These apps work seamlessly with the core functionality and are obtained via an app store specifically for financial advisers. This opens up your opportunities in a way that has not been possible before. For instance, you can customise the suite of applications for each client; you can replace any that you’re not happy with and of course you can install new options the moment they become available. Everything works specifically with and to enhance your business. How does that sound?
Before I get you too fired up, we’re not there yet, but as I see it, the biggest evolutionary trends are all heading in that direction. These are part of the three mega-trends which I see revolutionising our fintech ecosystem. Each is at a different stage of development, but they are coming. Let me explain in more detail.
The first of these megatrends, and currently the furthest advanced, is Open Data, accessed by APIs (Application Programming Interfaces). In the last few years, these concepts have become increasingly familiar and we are now seeing major developments in the infrastructure that advice firms use and the services they offer to their clients that depend almost entirely upon them. Open Banking and its emerging counterpart Open Savings, as well as the DWP’s Pensions Dashboard project, to name but a few examples, all rely on APIs to aggregate and integrate data from many sources. The best way to think of APIs, I heard someone say recently, is as a large fleet of Deliveroo delivery moped riders taking your orders and zipping round town to assemble meals from a massive number of different restaurants.
Britain is one of the best examples of Open Banking and is leading the world when it comes to open data initiatives. UK regulation requires that firms not only meet the European PSD2 standard for the use of data, but also mandate how the data must be formatted and in what structure. These additional stipulations, not mandated elsewhere, have helped remove many of the obstacles to open banking-based services and have placed the UK at the forefront of the Open Banking initiative.
At the same time, another big trend has been developing; the relocation of IT infrastructure from the real world to the Cloud. I believe this is likely to be the biggest change in our lifetime in how we use technology. Cloud-based tech is infinitely more powerful and more connected than our existing systems – and what is more, it is owned and managed by gigantic corporations that can invest staggering sums in making it more powerful still. The biggest is AWS (a part of Amazon) which had a capital expenditure budget last year of US$32 billion. Having that kind of power available is transformational for application developers. They can pursue bigger, smarter, faster and very much more integrated solutions. More importantly, it provides flexibility for businesses to, for example, upscale at pace.
Finally, we have the march of the microservice, the third of my major tech trends to hit our industry.
The ability for the technology to do one job and have that one job well executed is undoubtedly gaining momentum, and it flows directly from the power of APIs and Cloud computing. It’s a new way of thinking and operating, enabling businesses to take a fundamentally different approach to their core platform functions and the various satellite functionality to deliver their propositions.
As mentioned, to date the industry has been focussed on platforms that provide advisers with all the functionality they need, the closed ecosystem. But what if platforms do much less – offering a set of core functions that are deployed in the Cloud, and then, surrounding these core platforms are any number of microservices. Think of these as being like apps that you install on your phone – that just do a single thing but do it outstandingly well and you only use (and pay for) the ones pertinent to your business and so your clients. These can run on any back-end solution as long as that back-end is powered by open data and open APIs.
Microservices are specific tools to perform a particular type of job – for example, one might handle a client’s CGT calculation, another might express ESG information about a client’s portfolio, a third might automate the communication around a 10% portfolio drop. All of these microservices integrate seamlessly into whichever core platform, or platforms, you are using – in whatever combination each client requires.
Moving to this kind of modular, Cloud-based world poses several challenges. But investment platforms powered by modern technology infrastructure and data architecture will be able to build on those systems and offer a dizzying array of options to institutions, financial advisers and clients.
Personally, I have never been more excited about the opportunities for innovation presented by these three transformational technologies. I believe you should be excited about them too – in the world of platforms and financial advice they are going to be operational and service delivery game changers.
Emma Napier works in business development at Bravura Solutions
There are 2 comments at the moment, we would love to hear your opinion too.
I welcome what might be BUT there are too many companies lagging behind the curve that have failed to adapt and adopt to new technology. Too many have sat on their hands, failed to invest for the future and could, to all intents and purposes, still be operating with a quill and ink, filling in ledgers and sending carrier pigeons between various offices such is their dismal ability to service existing clients.
Not so convinced about mega trend #3. Whilst microservices do support increased specialisation they also introduce the potential for incompatibility, e.g. using different data definitions, bases for forecasting, terminology, approaches, strategies, etc. Each microservice might be great in isolation but getting them to work consistently together can be a problem. And, I’m not talking about physically sharing data I’m talking about the data itself being different, e.g. ATR definitions are notorious for being different across the industry. Personally I think a trend towards ‘Closed’ eco-systems is just as likely but, only time will tell!
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