Open banking is a UK Competition and Markets Authority initiative which aims to enable clients share their banking data with third party providers and promote competition.
According to Bravura open banking will:
- Drive down advice costs,
- Improve clients’ understanding of expenditures,
- Improve understanding of long term saving needs,
- Help visualising investment performance,
- And close the advice gap
For advisers, this could mean they would be able to draft more accurate cash flow plans by pre-populating the first few pages of a fact find, thereby lowering the cost of advice.
Commenting at a Bravura hosted roundtable of senior platform executives, workplace savings providers and financial advisers, Nick Parsons, global chief technology officer at Bravura, said: “Open banking has huge potential to drive efficiencies in the UK’s advice community.
“Speeding up key processes such as cash flow modelling and fact finds could not only significantly cut the cost of advice but open it up to large swathes of orphaned clients that were left un-catered for following the retail distribution review.”
Sean Hawkins, strategic partnerships manager at wrap platform Ascentric, added: “If you make things more efficient, it makes it easier to reach people who might otherwise ignore their finances. For example, people leaving university with debts might simply think their finances are bad and ignore the issue. [Open banking] makes advice more inclusive.”
Bravura has also released a white paper on open banking exploring how increased data sharing could empower investors and nudge people to save more.
For example it suggests services could be developed to help with debt management using transactional data to closely analyse where spending could be reduced to pay off debts in a manageable fashion.
Open banking data analysis
Open banking data analysis could also help empower investors, so they better understand their spending habits and analyse how they may change in retirement.
Chris Daems, director, Cervello Financial Planning, commented: “We have clients where we have spoken to them as they are coming into retirement and they don’t know how much they are going to spend. Open Banking could truly test how much they are going to spend without them having to add it up every month.”