Bank of Scotland, Halifax, Lloyds and Natwest have just announced over 200 branch closures collectively. Natwest say it’s as a result of the ‘dramatic shift’ from face-to-face to online and mobile transactions. Nothing new there… 32 of its branches went last year because of ‘increased use of digital banking’ and 300 as far back as 1996, as it rolled out new technology.
Online investing is at a much earlier stage than online banking, but the banks will use the learnings from 20 years of digital transformation to inform their strategies and, they hope, to get ahead of other wealth managers.
Having pulled out of financial advice as the RDR came into place, they are returning to the market with face-to-face in-branch advice services typically combined with online execution-only services. Santander launched advised and self-directed services in 2016 and Natwest did the same in February of this year.
Automated or robo-advice services are set to follow. The banks will be dissecting the most recent FCA guidance consultation to come out of the Financial Advice Market Review (FAMR), which provides a clearer framework for how to do this. It covers off the crucial areas of ‘streamlined advice’, the fact find process and the key considerations when offering non-advised services.
Having been well and truly burnt by mis-selling scandals, the banks are looking for certainty around the rules and the ability to control how their services are delivered to clients. FAMR is beginning to help on the first and ultimately, it is choreographed with the UK implementation of Mifid II which ties regulated financial advice to a ‘personal recommendation’ making it more distinct from non-advised ‘guidance’. On the control point, automated services take some of the risk out of how individual advisers present, or sell, products to the end investor.
The mass affluent and the mass market consumers that fall into the advice gap are in the banks’ sights but with a further realisation that good digital services are demanded by everyone, including the wealthiest. That explains why the likes of Coutts (the upmarket cousin of Natwest) has launched an online investing service for self-directed investors. You can start with £500, although this is at odds with the great expectations that you’ll need to allude to in order to open the mandatory Coutts account. At a more modest level, Investec Wealth and Investment’s Click and Invest service is available for people with £10,000 to invest and UBS’s new SmartWealth service offers regulated financial advice for people with £15,000.
The guiding principle for the next phase of investing services has to be to consider where the customer is with their behaviour and whether service providers are keeping pace with their digital expectations.
Almost everyone in this sector speaks ‘digital’ these days, albeit with varying degrees of fluency. It’s a top priority for most companies, with 92 per cent of online investing propositions having hired someone specifically to lead the digital side of the business, according to Platforum Digital Benchmarking research. Mobile is a ‘very high priority’ for 75 per cent but mobile optimisation often stops short of logged-in account pages and mobile transactions. Mobile banking has gone further than this.
Over in the marketing department, the focus on digital is also ramping up, which is evident from this year’s very digital Isa season – we’re seeing online advertising from the old and the new of the online investing services. The likes of Fidelity and Hargreaves Lansdown are joined by the new wave of ‘robo advisers’: Moneyfarm, Munnypot, NetWealth, Nutmeg and Scalable Capital. Tilney is in there as well promoting high-end financial planning.
Eighty four per cent of online investing services are increasing their digital spend this year with marketing automation investment increasing most. Paid search, programmatic and website UX are getting the lion’s share of budget.
Companies looking at the digital investing opportunity typically want to know more about:
- Which business models will make headway in 2017? Traditional DIY platforms like Hargreaves Lansdown versus fund managers like M&G and Vanguard going direct. Or will the banks make their mark?
- How to get organised for success in digital? How to change culture, build internal capability and decide priorities.
- Digital marketing – how to engage with consumer who aren’t interested, both in terms of on-going communications and customer acquisition.
Ultimately, it’s about keeping up with the digital customer and the wealth sector is at least getting out of the blocks.
The D2C and Digital Investing Conference on 29 June in London is a forum for these topics.
Jeremy Fawcett is head of direct at Platforum (@jfawcett)