According to the FCA, the point at which people may need professional support to manage wealth effectively starts at around £10k in investable assets. In a survey of IFAs by Royal London, the average point at which an IFA would start talking to a client is when they hit £48.6k. If you’re in between those two numbers, welcome to the advice gap.

These may be UK numbers but it is a global phenomenon, in India for example, only 12% of investors have accessed financial advice. Across the world, the point at which it is viable for an IFA to spend time on a client is higher than the point at which the client starts to need advice. 

It is a huge opportunity for technologies that can enable IFAs to operate more effectively and one that is thrown into an even more stark light in the socio-economic context of a number of key developed markets. In the US alone, estimates show that around $68 trillion will be inherited by Millenials and Gen X from their Boomer parents over the next 25 years. This is the largest ever generational transfer of wealth and according to studies, between 66% and 95% plan to fire their parent’s financial advisors upon inheriting in favour of using more digital-lead services.

Open Banking provides significant opportunities for IFAs to drive efficiencies within their business and, in doing so, reduce the level at which it becomes viable to engage with new clients. Use cases reported in The Global Open Finance Index ranged from using Open Banking Payments for instant account funding during onboarding to the smart allocation of dormant cash in user bank accounts. In fact, adoption amongst wealth managers correlated strongly with markets positioned as “leaders” in the open banking space and equated with an average 5% over-index on the consumer pillar.

There are still significant challenges if Open Banking is to achieve its full potential in this space. With a dataset restricted to bank accounts only, significant opportunities reliant on companies being able to aggregate data from other wealth management products are curtailed. Again there is evidence of the impact of this in the Index – Brazil’s regulatory structures have already expanded to include wealth products and, when questioned, 26% of in-market experts said they expected wealth management to be amongst the sectors most heavily impacted by Open Finance. The Index average for this is just over 17%.

There is no doubting the fact that, as a new generation starts to become the driving force behind the wealth market, bringing with it heightened digital expectations, financial advisors and wealth managers will have to adapt. Open Banking offers a significant avenue for doing so and yet, in the UK at least, adoption is dragging behind sectors like lending. We’ll be unpicking the reasons for this at our next campfire on Thursday 16th March alongside Samantha Seaton, Faith Reynolds and more of the best minds in the industry. 

We’ll be looking at the advice gap in the UK, the drivers of it and how wealth managers are using Open Banking to pioneer new ways of adapting. You can register to attend here, and add the event to your diary with this link.

Don’t miss out.

Helen Child, Founder & CEO, Open Banking Excellence