Ian McKenna: Tough FCA makes UK Europe’s leader in fintech
By Ian McKenna
A round-up of the standout presentations at this month’s Finovate London event
Two weeks ago, Finovate rolled into London for the European instalment of its 2018 conference season. For those who could not attend in person, videos of all the new services demonstrated will be up online shortly at Finovate.com. Here are my views on those that stood out.
Envestnet is primarily known in the UK as the company behind Yodlee, although it does much more.
It showed a powerful data driven analytics tool for advisers, which highlights important client event notifications on a daily basis by voice. Intended to help identify those clients most in need of attention, it raises the prospect of advisers being able to get into their cars each morning and have Alexa read them a summary of key client events as they drive to work.
This is not only very cool but a great example of technology helping advisers focus their attention on important issues.
Currently a darling of the InsureTech set, Anorak is actively targeting the UK, but it gave a presentation that would have most traditional advisers seething, opening by saying life insurance is stuck in the dark ages and distribution is broken.
I was underwhelmed by the demo. If you take off the user interface it is not that great and, having run sample cases through the system, I think it has a bit to learn about consumer behaviour when buying insurance. It says consumers look at more than price, but at this stage it seems to present rather limited data on what it calls guarantees.
It is worth keeping an eye on. If it could do a better job around the qualitative data, this may become interesting. That said, I am aware of several robo protection propositions being built to support the traditional adviser market, so it may face keen competition sooner than it thinks.
The demo by Hydrogen Platform is worth watching for its voice- enabled, API-based, savings and planning service, supporting multi-product, currency and language using aggregation. This notably uses public blockchain security.
Wealth Wizards also showed its new artificial intelligence technology, Turo. It has focused the discussion around its potential to help with defined benefit transfer cases, which I think is a mistake, as it has far wider and less controversial uses.
It identifies the fact advisers must configure their robo offerings to align with their firm’s individual house view and philosophy. Using sample data, potentially from previous cases, is a very powerful way to do this and can tell firms much about how they deliver advice.
This has huge potential, especially in compliance, but I do not think it has hit on the way to deploy this to its greatest advantage yet.
One concern I have is that the FCA requires advisers to understand the basis of how any system delivering advice in their business works, so it is going to need to share a lot of detail on what is under the bonnet.
Soon, the FCA will want a back door into every advice firm’s systems to examine such issues. The Securities and Exchange Commission in the US has been heading in this direction for years – it is just a matter of time before our regulator does the same.
BehaviouralIQ deservedly walked away with one of the prestigious “best in show” awards for its risk profiling service that engages with a wide range of behavioural issues. I can see this being a very positive development in the way these services grow. Keep an eye on this firm: it has a lot to offer in evolving how suitability can be assessed.
Not all positive
Regulators should attend Finovate to be aware of emerging trends and services. Not everything they see will be positive. Some technology vendors use the event to highlight services that will have poor customer outcomes and encourage poor practice, especially by banks.
There is far too much talk of making more money for banks and not enough concern for consumers. Is it really a good idea to encourage people to take credit where they do not need it, as a number proposed?
Equally, many presentations showed banks just see insurance as something else they can make more money from. Few, if any, focused on meeting the customer’s needs. Most of what I have seen is a regulatory time bomb waiting to explode.
I was also underwhelmed by many of the European robo services shown. Several offered technology that just looked slightly sexier than versions of things that have been available for almost a decade. And while a number said their systems were Mifid II compliant, what I saw raised more questions than answers.
Finovate reinforced that the FCA really does drive higher standards through its tougher regulation. UK fintech is generally built and delivered to a far higher standard than on the continent, although there are honourable exceptions.
On a positive note, the event did change my thinking on blockchain, with demos showing how the technology is now beginning to deliver on some of its promise.
Ian McKenna is director of the Finance & Technology Research Centre