Open Finance: a huge opportunity for Financial Advice, but only if we start with people, not tech

Open Finance holds immense promise for the future of financial advice – across wealth, pensions, mortgages and debt management – where it could resolve several long standing challenges. 

Somewhere in this opportunity space lies a sweet spot where adviser needs and client needs line up. But we'll only find it if we approach this the right way. The Big Risk lies in over-investing in technology that fails to address the human challenges.

The promise of Open Finance

For advisers

By streamlining data collection, transfer and processing, it could alleviate the administrative burden on financial advisers, allowing them to focus more on relationship building and applying their expertise. Particularly, it could improve the efficiency, accuracy, and speed of the fact-finding process, significantly reducing the cost of onboarding new clients. 

It could also help advisers improve the service they provide to existing clients, both to deliver greater ongoing value to and to reduce the cost to serve. For example, advisers could harness rich accurate client data to prompt proactive, timely conversations about changes in individual circumstances. Or, through automation, they could ease the burden of responding to queries about changes in the market.

For consumers

Consumers could benefit from a more transparent and comprehensive understanding of their finances from the outset, empowering them to feel more like stakeholders in the process and make better decisions in collaboration with their advisers.

They would feel the value of advice sooner by gaining confidence from a clear view of their financial position earlier in the journey. And a more proactive service would help them to recognise the value they get in return for annual fees.

The crucial human element

The transition carries significant risk because it’s technology-driven. For evidence, we can look at the failure of so many startups and initiatives based on clever Open Banking technology. Several years in, many consumers are still wary of and confused by services using Open Banking – a problem that will multiply with Open Finance as the breadth of data sources grows. 

Here are just a few of the knotty challenges that we’ve already seen arise in personal data sharing interactions:

Gaining consumer trust

Consumer trust is paramount. Without trust, people are unlikely to share personal data, reducing engagement with Open Finance-based services.

Managing cognitive load

The demand for data sharing can overwhelm consumers, potentially leading to inaction or poor decisions due to a lack of understanding.

Navigating safety and ethics

The design of Open Finance services must carefully consider the complex safety, ethical, and regulatory implications of personal data sharing.

A human-centred approach, for human problems

Designing systems and services without a deep understanding of the people who will use them is like playing chess blindfolded and expecting to win. Okay, Magnus Carlsen might be able to do this, but you get the point!

To mitigate the Big Risk and unlock the full potential of Open Finance in personal finance advice, it’s essential firms adopt a human-centric approach. That means two things 

  1. Using research to identify consumer needs and barriers before significant investment is made in technology 
  2. Rapidly prototyping solutions that can be tested and iterated cheaply

A human-centred approach is a good fit for human problems like trust, understanding, and safety. It will reduce the risk of delivering the next wave of open data white elephants.

Foundations to build on

By placing consumer needs at the forefront of technological innovation, we’ll pave the way for a future where financial advice is more accessible, insightful, and effective than ever before.

There’s a lot of work to do, but we’ve already begun to establish foundations. We’ve been building on our insights from work in Open Banking through our recent involvement with the CFIT coalition. Here are some examples:

Blend digital and human interactions

This builds trust. Incorporate human contact points with clients early in the customer journey to help earn trust, explain data sharing and alleviate potential anxieties before they become blockers.

Ask for consent at the point of need

To avoid overloading consumers, request data when its utility is most apparent, and not before. 

Avoid all-or-nothing sharing choices

To increase user comfort and trust, help users to decide specifically what data sources they do and don’t share. From a business perspective, it’s usually better to have some data than none.

Show value progressively

Requested data in ‘stages’ with incremental value shown at each step. Providing tangible benefits or insights in return for data will increase consumer comfort and willingness to share more data further in the journey.

Let’s chat

If you’d like to hear more about these insights or see some of our prototypes, we’d love to hear from you.

Tom is the Experience Director in our Financial Services team, motivated by a desire to design products and services which help people make better financial decisions. Ever curious, Tom has a keen interest in exploring how we evolve and adapt our practices in response to new demands, technologies, events and regulation.