Landscape of UK Automated Financial Services propositions
F&TRC’s DigitalWealthInsights.com team are actively monitoring over 130 organisations within the UK that are currently in various stages of developing their digital financial service propositions for consumers.
Like most things in life we start at the beginning and continue our journey, progressing one step at a time, until we reach the end goal.
So too should this be applied to our Financial Life.
My Financial Life
Step 1: My Financial overview. How am I doing? Get an overview of your current financial situation i.e. income, outgoings, assets and liabilities. Identify the problem.
Step 2: Reduce debt & start micro savings. Take action. Engage in real-time budget planners, debt management and micro savings tools to improve the way you manage our daily income, expenditure and debt.
Step 3: Emergency cash reserve. Build up a cash saving’s pot for those unforeseen emergencies, typically a cash ISA / savings account.
Step 4: Protect myself and my family. Consider which protection policies need to implemented to protect yourself / family against loss of income, illness, death etc.
Step 5: Buy a home. Look to invest in an asset to build independence and security for your family.
Step 6: Start investing for medium to long term savings goals. Consider contributing towards pension savings, ISA and investment accounts.
Step 7: How do I want to retire. Determine your income, expenditure, debt, level of savings and ill health options in retirement.
The graph below illustrates which step of the consumer’s financial life the various propositions we are analysing cater for.
68% of automated financial service propositions provide an on-line investment service.
Of these propositions approximately 80% do not address the consumer’s income, expenditure and debt (steps 1 -3), but instead jump right in at assisting the customer towards investing for the medium to long term (step 6.)
The government’s motivation for driving the automation of financial services is to engage the mass market in saving for their future.
To be able to save for the future, it is critical that we understand how to save for today first.
Research conducted by PWC in 2015 identified that 63% of the employees they surveyed were not saving for retirement because they had too many other expenses and 46% said they had debt to pay off first.
Consumers need assistance in getting the relationship between the three key elements, income, expenditure and debt working well and to a level where they physically have sufficient surplus income available to allocate towards long term savings.
Is it fair then to say that 80% of automated investment propositions currently in the UK are not optimised to help the mass market with their long term savings?
My question then is, how much longevity and customer loyalty will these propositions have when the debt managers and micro savings tools start to gain momentum by actively helping customers improve their financial life?