We have Open Banking, now we need Open Investments

The retail investment market in the UK is ripe for innovation. With the correct impetus it could bring transparency and improved customer service for individual investors. Platforms which would allow users to track and manage all their investments from one place would bring value to users and improve their customer experience. The opportunity is there to make this happen, especially with the recently announced Financial Conduct Authority review of the UK consumer investment market.

Wouldn’t it be great if I could see all my investments, pension accounts and savings with different service providers in one place, giving me a simple and complete view of where my money is invested, what returns they are making, and what I am being charged to managed them? Innovation like this would not only bring transparency and competition to the investment management sector, it could also get me better value for my investments. The possibilities are huge.

As a nation Britain has 9.9 million active members of defined contribution pensions (the one where individuals have to decide what they want their pensions invested in). We subscribe to over 10 million ISA accounts each year (including almost 1 million junior ISAs). Collectively we have over £300bn invested in stock and share ISAs and over £200bn invested in defined contribution pension schemes. Yet it is almost impossible to compare different service providers and understand what they are charging for. It is high time that there is some serious attention given to improving customer service and experience for investment products and making sure that individuals are getting value for money.

Banking and payments faced similar issues a number of years ago, and the Competition and Markets Authority initiated a review for those services in 2016, the findings of which required innovation and improved competition in the banking space — resulting in what we now know as Open Banking.

Open banking came into force in the UK during 2018 to empower consumers to benefit from their data, get auxiliary services such as seeing all payments and transactions in one place and enable additional features such as helping us with budgeting, finding the best deals, and finding products and services that suit us best. It is now time to do something similar for our investments. The Financial Conduct Authority has recently launched a review of the UK consumer investment market. Could this review also be an impetus for renewed focus on innovation, and improving customer service?

What could such an overhaul do to the investment services for UK individuals, especially with the use of technology? A system where we could see all our investments across share dealing accounts, pension investments from different employers, cash and stock and share ISA accounts, and other investments in one consolidated view, would not only allow us to keep track of all investments, it would allow individuals to assess returns, manage investment risks and compare fees and charges that we are paying. By enabling investment account data to be shared in a controlled way, users could see the value from switching to another provider, understand different investment options and improve their investment experience.

The technology certainly exists to make all this possible. Various platforms such as MoneyPatrol and Personal Capital (in the US) allow the consumer to track their listed equity, bonds and fund investments. In the UK PensionBee allows users to consolidate various workplace pensions into one account, and Open Banking allows users to see their bank and transactional account details in one place. Fintechs could easily bring together these and a lot more functionality such as fee analyser, investment checkup, retirement nest-egg calculator, and portfolio allocation tools, giving the consumer better value in investment services (to all those budding fintech startup entrepreneurs — there is an opportunity here).

Apart from being able to manage an individual’s investments, innovation in this area could lead to better education and awareness of investments, savings and retirement planning. Given the low interest rate environment that we are in, individuals should be able to access the different investment options that are available in an easy way, which is certainly not the case yet. Numerous research and analysis have shown that over longer time periods prudent and diversified equity investments have generated better returns than any other asset class. Yet the British public are one of the lowest direct owners of listed equities in the developed world, with UK individuals owning 13.5% of the UK stock market in 2018, an improvement from 10% in 2008, but still way behind the likes of Australia with 31% and the US with 38%. Over a longer period and with the right type of financial education, it would make people more financially responsible and accountable for their own retirement planning, reducing the burden on the state pension.

The opportunity is there to make this happen, especially with the recently announced FCA review.

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A professional working in the financial services sector, I write about business, financial and economic issues — in a personal capacity.

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Nuruddin Walyani

Nuruddin Walyani

A professional working in the financial services sector, I write about business, financial and economic issues — in a personal capacity.

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