The end of a year that has seen a once in a century event transform working practices is a great opportunity to ask where do we go next? 2020 has taught us that necessity can drive major change rapidly.
What sort of evolution do we need to see if we are to transform workplace pensions in the UK? I recently remotely attended CB Insights Future of Fintech conference to check out the very best of American wealth and savings technology. Three organisations demonstrated fresh approaches I believe would work as well in the UK as they are in the US.
MX is a financial data aggregation company who specialise in extracting details of consumers’ personal financial lives from a wide range of sources and presenting the information in ways that can both better inform consumers and guide them towards making better savings decisions. What differentiates them is they achieved 10 times greater ongoing consumer use after 12 months, compared to their peers.
Consumers are increasingly concerned at how their personal data is used. However, MX chief advocacy officer Jane Barratt highlighted how delivering the right financial insights to consumers, at the right time can help them identify where they have the opportunity to start to save. Beginning with very small amounts, people can get started with a savings habit, then move to increasing levels of investment.
Acorns is a US micro savings business proving this. In just six years it has enabled 8.2 million users, 60 per cent of whom had never invested before, to save $3 billion through rounding up credit card transactions, saving a few extra dollars each day and converting credit card or retailer rewards to savings. When you add this type of micro savings capability to the savings insights provided by an aggregator like MX there is a real opportunity to help consumers save, where they don’t believe they can.
One company is bringing pretty much all this capability together. Envestnet is a publicly traded US financial technology firm supporting over 100,000 financial advisers and 4,500 financial enterprises, servicing around $4 trillion in assets. CEO Bill Crager describes the firm as “a business that thinks about how financial advice is delivered to the consumer, to the household”. As a B2B platform it is doing this through an intermediary or another technology company, to engage consumers to better understand their financial lives.
Crager says the company’s objective is to understand the financial journey that individuals go on. From the early stages of trying to figure out a budget and pay off credit cards and student debt, all the way out through the legacy they want to leave for the next generation.
Envestnet brings together its data aggregation offering Yodlee, which does operate in the UK, with its financial planning capability, Money Guide, the most popular financial planning software with US advisers, and an investment platform that helps drive the advice process through investing and managing accounts. This is now complemented by annuity, banking and other capabilities.
Auto enrolment has enabled over 12 million more people into the retirement savings market but it is widely recognised that auto enrolment contributions alone will not deliver a suitable standard of living in retirement.
Currently we are not delivering the right mechanism to help consumers optimise their contributions or take control of their retirement planning. The technology providers above are providing a great example of how this can be achieved.
The workplace pensions industry focuses on getting consumers to save as much as possible on a regular basis. Historically this was driven by advisers receiving vastly more commission for regular contributions than single premiums. Eight years after RDR scrapped commissions I believe it’s time to change our approach. Organisations like Acorns, Moneybox and True Potential have demonstrated consumers are willing to save small amounts very often, if we give them the ability to adopt micro-savings we can help million save more for their retirement.
The need to drive up the level of retirement savings in this country is one thing the whole industry sees as crucial. I believe the combination of data that can be used to inform consumers, supported with micro savings capability is a clear opportunity to change how people save for their retirement.