Financial Advisors Manage Clients’ Emotions, Not Their Money

By David Miller

When we see or hear the word “cyborg,” most of us envision the cold, red eye of Arnold Schwarzenegger staring at us through a movie screen. However, the idea of something half human and half machine may no longer be just a tale from a Hollywood movie.

Cyborgs are becoming a reality, albeit in ways somewhat different from the way they are portrayed in The Terminator.

In the financial services sector, the combined power of intelligent computers and humans is bringing in major disruptions that have not been seen in any industry before.

While the thought of robotic-humans is a bit far-fetched, the collaboration of super-computers with highly emotionally intelligent human beings is real and proving to be revolutionary. The future of finance is therefore in the power of computers and at the hands of emotionally intelligent financial advisors.

Thanks to artificial intelligence and deep learning, computer algorithms now can think and make better investment decisions than humans can. Just like the human brain, the super-intelligent computers are relying on artificial neural networks yielding neuro-evolution to interpret data, learn from it and make informed decisions. These machines are proving to be better than humans when it comes to investment functions that require high IQ – given their ability to analyze huge chunks of data and execute decisions within microseconds.

Today, intelligent computers are not only able to analyze big data to determine viable investments but they also can scan for tradable news and execute trades at supersonic speed. With the algorithms taking over the decision-making part of investing, the roles of financial advisors in wealth management are shifting from advisory services to client services.

After interviewing more than 100 millennials in the financial services space, the shift from advisory services to client services makes sense.  Most millennial financial advisors (unlike many of those in older generations) do not have an interest in both managing money (trading) and servicing the client (giving clients guidance on allocation weightings in relation to their goals and needs). This speaks to the evolvement in our industry in terms of complexity and the emotional intelligence of millennials. Millennials seem to better comprehend the core purpose of the financial advisor role, which is to manage client emotions, not their money.

According to a 2017 report by the CFA Institute, the disruptions happening in the financial sector are pushing investment advisors to a value-oriented, more ethical and socially responsible profession.

 

No Longer Trying To Beat The Market

 

Computer algorithms are taking over the financial advisory function of investing, meaning that investment advisors no longer have to focus on trying to beat the market. Instead, the focus is shifting to holistic customer services which include investment alignment.

Up until recently, investment alignment has been available only to private banking clients. But with robo-technology leveling the ground, financial advisors have no option but to offer these services if they are to remain competitive.

Investment alignment involves fostering teamwork among all the professionals involved in wealth management. These professionals include financial planners, accountants, insurers and attorneys. Financial advisors always have perceived investment integration as expensive and time-consuming. This is the reason advisors have been willing to offer it only to those who can afford premium prices.

The most exciting part, however, is the growing demand for financial advisors who can connect with clients at an intellectual, emotional and social level. Even when computer algorithms are taking over the decision-making part of investing, most clients need a human to listen to them and respond to their concerns. This explains why hybrid robo-advisors have been outperforming their counterparts that employ a purely robotic strategy. A study by MyPrivateBanking predicts that by 2025, hybrid robo-advisors will manage more than 10 percent of the total investable wealth.

In regard to human touch, a study by Accenture shows that financial services clients now prefer to be served by financial advisors who can provide personalized and empathic services.

The technological disruptions in the financial industry have made it possible for clients to switch service providers easily. As a result, wealth managers must invest in developing strong relationships if they are to remain competitive.

Going forward, financial advisors with a therapeutic approach to wealth management will be on a high demand.

According to Daniel Goleman, a psychologist and the author of Emotional Intelligence, the tenets of emotional intelligence include self-awareness, self-regulation, motivation, empathy and social skills.

Wealth managers need to be emotionally intelligent if they are to help their clients develop these skills. In investing, emotional intelligence helps investors understand how their emotions influence their investment decisions to create a disciplined investment approach.

David Miller is founder and CEO of PeachCap, a financial services firm that specializes in helping registered investment advisors and wealth management firms to offer white glove financial services to the mass affluent at low cost. David may be contacted at [email protected].

 

© Entire contents copyright 2018 by InsuranceNewsNet.com Inc. All rights reserved. No part of this article may be reprinted without the expressed written consent from InsuranceNewsNet.com.

 

Money sense for entrepreneurs – Don’t just manage your business but your money too!

Mihir Mehta

The words “entrepreneurship” and “easy” may have similar initial letter but rarely do these words go together. The journey of entrepreneurship is strenuous in every aspect including mental fatigue, persistence, fear of failure and financial well-being, among others. Regular interactions with entrepreneurs reveal that an essential aspect of the entrepreneurship journey is the financial well-being of the entrepreneur as it enables him/her to stay positive in the face of adversities.

Adept money management is an indispensable requirement for enterprising individuals and this may seem like a trying task initially but the benefits keep accruing as the promoter works hard to establish his/her business. In this article, I have covered some notable points that will help entrepreneurs establish and develop good money sense.

Save invest:


Yes, this is the most common money management dictum but in all fairness, this is the hardest for an entrepreneur to follow. More often than not, entrepreneurs miss out on simple money-saving options thereby, increasing their personal overheads. In normal course, these overheads do not become a problem for the entrepreneur but during lean periods, these overheads may burn a hole in the pocket and lead to lower savings for personal consumption.

While saving is the first step, it is not prudent to keep saving and keep the money idle in low return instruments. Basis the risk appetite and profile of the entrepreneur, it is important that the saved money is invested into low-risk, high yield instruments to create a better source of passive income. Considering that the entrepreneur is already in a high-risk territory with his/her venture, it is imperative to select instruments that can prove the risk-return profile.

Always be on the lookout for freelance opportunities

To be fair, this is easier said than done but an entrepreneur journey’s is so volatile that there may be some periods of moderate work and during these times, freelancing opportunities can help the entrepreneur create an income stream. That being said, an entrepreneur needs to be absolutely cautious with this idea before it becomes a big distraction that may pull away focus from the venture at hand. The thought is to be open to freelancing opportunities as this abets income streams provide for a good vent for mental fatigue, if any.

Take short-term subscriptions/retainers, always

As a new entrepreneur, there is a high chance for someone to get too excited and purchase products/services that may not be required for the venture. When the entrepreneur starts with a pool of capital, the tendency is to subscribe to products/services that may deem necessary but may not add a lot of value to the venture/promoter. The trick to avoid the purchase conundrum is to first go for a trial period. If the trial period is not enough to understand the utility of the product, then one should go for a shorter subscription period and test the product/service. It is tempting to go for annual subscriptions because they offer a reasonable discount on the same. However, it is prudent to go for a shorter subscription because it allows you to test the product thoroughly before you commit to a big overhead cost.

Find an advisor

Last but not the least, an entrepreneur should always find a mentor/advisor, who can help him/her in ensuring financial well-being. Considering that the promoter is busy working on making things right in the venture, financial well-being mostly gets the back seat. Additionally, it is difficult for an upcoming entrepreneur to focus on researching and tracking financial products for good money management. Therefore, it is prudent to get a good, qualified advisor on-board and allow for professional management of personal capital. Yes, it may come at some charge but if negotiated well, the same can turn out to be a boon in the long run.

An entrepreneur is always striving to create something that is a genuine need in the society and while it may be absolutely taxing, the fight is what keeps them going. That being said, healthy financial state enhances the mental agility of the promoter and allows him/her to work efficiently on the venture.

(The writer is Vice President at Ashika Capital and Founder at Fintuned)

Gillette legislator proposes state council to manage air service contracts – Casper Star

A jet takes off from the Casper/Natrona County International Airport on Jan. 3.

Men most regret not investing—but women have a very different No. 1 money regret

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Add financial regrets to the list of things separating men from women.

While the genders do have plenty in common, they differ on how they wish they had spent their money. That’s according to a recent survey by financial website GOBankingRates, which asked more than 5,000 U.S. adults to identify their biggest financial regret in 2017.

The participants were asked to choose among the following: “falling into debt,” “living above my means,” “not investing in the stock market,” “not saving enough money,” “paying for college,” “spending money on non-essentials” or “other.”

Men’s biggest money regret was not investing: Nearly 15 percent chose that option versus about 9 percent of women. Interestingly, men are more likely than women to fear losing money in the stock market, according to another survey.

For women, the top money regret was not saving enough: a plurality, or 41 percent, chose that option, versus 33 percent of men. The survey also found a higher percentage of women than men have less than $1,000 in a savings account: 62 percent versus 52 percent, respectively.

And 36 percent of women, compared to 33 percent of men, have nothing saved for retirement.



Here's the smartest and dumbest things to do with your end-of-year bonus


Not saving enough money falls in line with Americans’ top money regret. Overall, 36 percent of respondents called this their biggest regret.

One-third of Americans have nothing saved for retirement, a previous GOBankingRates survey found. And 39 percent have nothing in a savings account whatsoever.

The second biggest fear among Americans was spending on non-essentials, with 23 percent of respondents choosing that option. A survey of 2,000 U.S. adults found that every age group, gender and income bracket say they waste too much money on dining out and other discretionary purchases.

When it comes to investing, 11 percent of respondents said they regret not getting involved with stocks; 8 percent chose paying for college as their biggest regret; and 7 percent chose living above their means.

The survey also gauged millennials’ financial regrets versus those of older generations. “Not saving enough money” was the biggest regret among adults 45 and older. Perhaps because they’re closer to retirement age and have less time to save or are already in retirement and wish they’d done more to build up their savings, the survey notes.



The definitive guide to retirement savings plans


For young adults, “not saving enough money” and “spending money on non-essentials” were the top two regrets, followed by “paying for college.” More than 44 million Americans have taken out student loans to pay for school, and their debt now totals $1.4 trillion.

That makes for a particular burden for young people: The average college debt for 20-year-olds is $22,135. For 30-year-olds, it’s $34,033.

There is room for optimism, though, whether you’re saving for college or another goal. A survey of more than 1,000 Americans found young people are better at managing money, in terms of goal-setting and financial engagement, than Baby Boomers.

And as Terri Kallsen, executive vice president and head of Schwab Investor Services, said, being aware of how you manage your money is a good way to begin achieving financial goals.

“It doesn’t matter whether you have a lot or a little — what matters is that you think about the money you have as your wealth, and that you pay attention to it.”

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Don’t miss: Younger people are actually better with money than Boomers and Generation X

Video by Brandon Ancil



How to split the check with friends when you're on a budget and they aren't


Shawn M. Carter

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Open Banking is here to change how you manage your money

On the face of it, open banking is just a data standard. What banks have to do is take your current account transaction history and make it available to other banks and accredited third-party services (securely, of course) when you give consent. Over the new few years, this will be expanded to include credit cards and other financial products. What can actually be done with all that data is where it gets interesting. One simple benefit of open banking is you can use one app to manage all your accounts at different banks, and move money between them (HSBC is already cooking one of these up). And if you’d be better off at a bank with lower overdraft charges, then another app could take the hassle out of switching.

In the future, you could let a comparison service look at your credit card history. It might tell you to move your debt to a competitor with a lower interest rate. On the other hand, given you square away the total balance each month, you might actually be better off with a card that has a higher interest rate but a better rewards and perks scheme. With all this data easy to read and to compare, it should make the big retail banks more competitive. If you can move all your savings into an account at another bank at the click of a button, it’s within your current provider’s interests to make sure you stay. That’s exactly what the CMA is trying to achieve, of course, while also giving smaller banks and fintech services greater exposure in an industry dominated huge, established financial giants.

There’s a ton of information buried in a bank statement. From how much you spend on vanilla lattes each month to the total you’ve wasted on gym memberships in the last three years. Maybe you’ve been really good at paying off your credit card bills, but the smarter financial decision would have been to overpay the same amount on your mortgage. The mind boggles with potential.

Some of the new wave of branchless, mobile-first banks already use financial data to offer smarter features. Monzo, for example, breaks down your spending into categories like travel, bills, cash withdrawals and eating out, and lets you set budgets so you get notified if you’re spending too much on fancy dinners that month. Or there’s B, which lets you set up saving goals, like the £1,000 you need for a new TV. Other fintech services that don’t offer bank accounts themselves are also ready to make use of your data. Plum monitors your spending habits and automatically squirrels away what you can afford to save each month. Bean looks at all of your recurring subscriptions and suggests when it might be appropriate to switch provider, or will cancel a long-forgotten membership on your behalf.

And this is what these over-the-top services have managed to achieve with limited access to financial data. Thanks to open banking, they should get even slicker, and we’re likely to see plenty more ideas of how you can better manage your money pop up — the next generation of financial advice. Prepare to see the big banks retaliate with more of their own smart features and services, too.

Companies can only start making all that juicy data work for you once they have access to it, though. Despite all having been told long ago about the January 13th deadline, Lloyds is the only high-street name that was ready on time. In December, Barclays, RBS, Bank of Ireland, HSBC and Santander all told the CMA they weren’t quite ready to meet the demands for data. Nationwide has also succumbed to some last-minute hiccups, but the extensions most were graciously granted can be counted in weeks, so customers won’t be missing out on neat financial insights for long. And given the complexity of complying with open banking and making sure security is up to scratch, a few weeks isn’t too bad as far as delays go.

Colliton: When should you stop managing your own money?



An article appearing in Next Avenue, www.nextavenue.org, a trendy new website for seniors, reprinted an article from MarketWatch.com, and addressed a common question with no easy answer – how do you handle your finances as you age? The article is titled “At What Age Are You Too Old to Manage Your Money?” It raises a very sensitive topic. In a somewhat similar vein, people might ask at what age should you no longer drive or when should you stop performing any number of tasks, the topic implying there is a time when you no longer have the abilities you possessed at a younger age. In this respect there is both good news and precautionary advice.

According to the article,a new study may have the answer to ages at which many or most Americans might be expected to lose their ability to pay bills, handle debt, maintain positive credit and assess the rate of return of an investment and detect fraud. The study conducted by the Center for Retirement Research at Boston College, “Cognitive Aging and the Capacity to Manage Money,” differentiates between the ability to pay, say your gas or electric bill and the ability to make sound financial decisions such as investment decisions you might make with a financial advisor.

First, there is good news. Assuming the individual has prior experience paying their bills and keeping track of their bank accounts, most people not suffering from cognitive impairment can be expected to continue managing their own money into their 70s and 80s. Those who are inexperienced and who, for instance, left this function to their spouses, could be expected to need help to do this.

However, according to the researchers, “financial capacity relies on two key abilities: 1. performing financial tasks, which mostly requires crystallized intelligence or knowledge; and 2. making financial judgments, which requires a mix of knowledge and fluid intelligence like memory, attention and information processing.”

In other words, while you might perform perfectly well paying your electric bill or your mortgage, your decision making ability to make sound financial judgments, like recognizing whether a proposal for a new investment is reasonable or recognizing fraud can diminish earlier. In fact, and here is one shocking conclusion, the authors stated the ability to process new information, the type of ability needed to make sound financial decisions, can begin to decline as early as in the 30s. There are, of course, those among us who might say, tongue in cheek, that many younger people do not begin to develop sound financial judgment until they are in their 20s or 30s (and for some people never) so there might be a very narrow window of opportunity.

There are now tests to measure financial capacity and for some elder law attorneys and financial advisors this might be an exciting development. We often realize there are some people, regardless of age but especially as we age, who handle themselves just fine for day to day living but should not make complicated investment and financial decisions. Guardianship is too serious a limitation. But there is a need for some assistance. With tests available,this might be one objective way to assess who needs assistance. Another factor, of course, is finding a reliable and honest person, often a trusted family member who can serve as agent under power of attorney.

Here are some recommended tips suggested (in abbreviated form).

1. Spend the time to make a spending plan when you retire, which will include where to draw money from, how to invest, whether to downsize or use home equity, and what might be left for the kids.

2. Involve the (adult children) and any other people (from whom) you seek financial advice when you make the plan.

3. Once you have a plan, document it and share it with your family and trusted advisers who may help you later on.

4. After age 75, make sure both members of a couple and a trusted adviser … know about the plan and have access to the account … to monitor for fraud.

5. Before age 75, agree on a process for transferring responsibility for managing money (in the event of death or disability) … and make sure both (spouses) know how to run the household’s finances…

Janet Colliton, Esq. is a Certified Elder Law Attorney and limits her practice, to elder law, retirement and estate planning, Medicaid, Medicare, life care, and special needsat 790 East Market St., Suite 250, West Chester, Pa., 19382, 610-436-6674, colliton@collitonlaw.com. She is a member of the National Academy of Elder Law Attorneys and, with Jeffrey Jones, CSA, co-founder of Life Transition Services, LLC, a service for families with long term care needs.

Tune in on Wednesdays at 4 p.m. to radio WCHE 1520, “50+ Planning Ahead,” with Janet Colliton, Colliton Elder Law Associates, and Phil McFadden, Home Instead Senior Care.

Colliton: When should you stop managing your own money?



An article appearing in Next Avenue, www.nextavenue.org, a trendy new website for seniors, reprinted an article from MarketWatch.com, and addressed a common question with no easy answer – how do you handle your finances as you age? The article is titled “At What Age Are You Too Old to Manage Your Money?” It raises a very sensitive topic. In a somewhat similar vein, people might ask at what age should you no longer drive or when should you stop performing any number of tasks, the topic implying there is a time when you no longer have the abilities you possessed at a younger age. In this respect there is both good news and precautionary advice.

According to the article,a new study may have the answer to ages at which many or most Americans might be expected to lose their ability to pay bills, handle debt, maintain positive credit and assess the rate of return of an investment and detect fraud. The study conducted by the Center for Retirement Research at Boston College, “Cognitive Aging and the Capacity to Manage Money,” differentiates between the ability to pay, say your gas or electric bill and the ability to make sound financial decisions such as investment decisions you might make with a financial advisor.

First, there is good news. Assuming the individual has prior experience paying their bills and keeping track of their bank accounts, most people not suffering from cognitive impairment can be expected to continue managing their own money into their 70s and 80s. Those who are inexperienced and who, for instance, left this function to their spouses, could be expected to need help to do this.

However, according to the researchers, “financial capacity relies on two key abilities: 1. performing financial tasks, which mostly requires crystallized intelligence or knowledge; and 2. making financial judgments, which requires a mix of knowledge and fluid intelligence like memory, attention and information processing.”

In other words, while you might perform perfectly well paying your electric bill or your mortgage, your decision making ability to make sound financial judgments, like recognizing whether a proposal for a new investment is reasonable or recognizing fraud can diminish earlier. In fact, and here is one shocking conclusion, the authors stated the ability to process new information, the type of ability needed to make sound financial decisions, can begin to decline as early as in the 30s. There are, of course, those among us who might say, tongue in cheek, that many younger people do not begin to develop sound financial judgment until they are in their 20s or 30s (and for some people never) so there might be a very narrow window of opportunity.

There are now tests to measure financial capacity and for some elder law attorneys and financial advisors this might be an exciting development. We often realize there are some people, regardless of age but especially as we age, who handle themselves just fine for day to day living but should not make complicated investment and financial decisions. Guardianship is too serious a limitation. But there is a need for some assistance. With tests available,this might be one objective way to assess who needs assistance. Another factor, of course, is finding a reliable and honest person, often a trusted family member who can serve as agent under power of attorney.

Here are some recommended tips suggested (in abbreviated form).

1. Spend the time to make a spending plan when you retire, which will include where to draw money from, how to invest, whether to downsize or use home equity, and what might be left for the kids.

2. Involve the (adult children) and any other people (from whom) you seek financial advice when you make the plan.

3. Once you have a plan, document it and share it with your family and trusted advisers who may help you later on.

4. After age 75, make sure both members of a couple and a trusted adviser … know about the plan and have access to the account … to monitor for fraud.

5. Before age 75, agree on a process for transferring responsibility for managing money (in the event of death or disability) … and make sure both (spouses) know how to run the household’s finances…

Janet Colliton, Esq. is a Certified Elder Law Attorney and limits her practice, to elder law, retirement and estate planning, Medicaid, Medicare, life care, and special needsat 790 East Market St., Suite 250, West Chester, Pa., 19382, 610-436-6674, colliton@collitonlaw.com. She is a member of the National Academy of Elder Law Attorneys and, with Jeffrey Jones, CSA, co-founder of Life Transition Services, LLC, a service for families with long term care needs.

Tune in on Wednesdays at 4 p.m. to radio WCHE 1520, “50+ Planning Ahead,” with Janet Colliton, Colliton Elder Law Associates, and Phil McFadden, Home Instead Senior Care.

Comment: As app-based ‘Open Banking’ hits UK, USA is likely follow suit

One of the biggest shake-ups to the way that consumers manage their finances launched in the UK this weekend. Known as Open Banking, it means that you’ll no longer be limited to using whatever apps your bank chooses to make available, but can instead manage your accounts from a wide variety of third-party apps.

It’s been possible for some time to use third-party apps to analyse your spending, and even perform some financial transactions, but right now in the USA, anything with access to your accounts relies on partnerships agreed by your bank. You can use the apps your bank wants you to, but not others. For example, Chase partners with Intuit and Wells Fargo with Xero and Finicity, but the choice of app is up to your bank, rather than you.

That’s what Open Banking changes …


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What is Open Banking?

Under both EU and UK law, banks are now legally required to allow consumers to use their choice of apps to access their accounts.

Banks can no longer act as gatekeepers, and you are free to use apps that aggregate data from multiple accounts and move money between them.

The thinking behind the move is that apps allow consumers to be better informed about their finances and do things like work out which bank account offers them the best deal, as well as to boost saving and cut the cost of borrowing.

What types of apps are available?

There are, of course, already huge numbers of apps that offer to analyse your spending, but most rely on you tracking your expenditure manually. Pennies (shown above) is one example. The reality for most people is that they use it religiously for a week or two and then it all becomes too much trouble.

One big difference with Open Banking is that you can grant the app of your choice direct access to your bank statements so that the analysis is performed automatically. Most of these apps get read-only access to your accounts, so they can import data but not carry out transactions.

But some apps can be given transaction access too, meaning that you can allow the app to act on its analysis, not just nudge you to do so.

At their most basic, apps show you how you spend your money. Particularly for small, regular expenditure, it’s easy to be completely unaware of your total monthly or annual spend. For example, if you spend $5 a day in a coffee shop, that’s $150 per month or around $1800 a year. Armed with information about how you spend your money, you can then make decisions about your spending.

But they can do more than this, like encouraging you to save. Once an app has offered you an opportunity to save money (perhaps by making lunch at home instead of buying it at work), you can then set it to automatically arrange to siphon spare funds into the savings account of your choice – which may not be with your primary bank.

There are other apps for borrowing, aiming to work out which bank or financial institution offers you the best deal for your circumstances. This can result in substantial savings when compared to just choosing from the lending products available from your own bank.

There are also apps for those who have difficulty managing their money. If someone tends to spend too much money when they get paid, you can use an app to automatically transfer your salary into a separate account, and drip-feed it back into your main account throughout the month.

How secure are Open Banking apps?

Allowing a third-party app access to your accounts is obviously a pretty scary thing to do, and has the potential to go horribly wrong, so the UK has taken a simple approach to security. It has applied the same rules to apps as to direct debits.

What this means in practice is that it is your bank’s responsibility to vet apps for safety, and if an app takes money without your authority, it is your bank – and not the app developer – that has to refund you. Your bank can then chase the developer to get their own money back, but that part of it isn’t your problem.

All the same, some are concerned that people may fall for fraudulent apps, manually entering bank details which then give them access to your account – and if you use an unapproved app, then that isn’t covered by the Open Banking guarantee.

Will the USA follow the UK and Europe?

So far, the U.S. attitude has been that it should be the market, and not the government, that decides how things work. That banks should be free to allow or deny access to whichever apps they like, and consumers can then choose their bank accordingly.

That partly reflects philosophical differences between Europe and the USA, of course. US banks are also not noted for innovation: they lagged a long way behind Europe, for example, in adoption of contactless cards.

There’s also not yet much impetus for change. Hardly anyone in the UK is yet aware of Open Banking and the changes it makes possible. It will take time for companies to educate consumers.

But my guess is that, once the benefits are more widely known, that will create pressure for US banks to offer the same kind of access. Most likely through commercial partnerships rather than through legislation, but just as banks had to adopt Apple Pay or risk losing customers, the same pressures will apply here. One way or another, US as well as European customers will be able to use a great many more apps to manage their money.


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Open banking: The money revolution nobody knows about

This weekend a major change in the way banks manage your data takes place, one that could completely revolutionise how we bank, who owns our financial data and which companies can offer us targeted financial services.

It’s called Open Banking and it’s driven by a new EU directive and new UK competition rules. Changes taking effect this weekend mean that banks will have to share financial data such as transaction history and spending patterns with other (regulated) third-party providers if the account holder requests it.

That might sound like baffling small print, but it could genuinely shake up the way in which you manage your money.

Instead of your personal data being something jealously guarded by your bank, you’ll be able to request that approved companies can also access it. That will mean they can help you analyse and improve your spending habits or simply just point you at financial services that better meet your needs.

But it’s not without its critics, and those critics argue that Open Banking will actually strip power from the consumer by creating complex chains of data access, making it harder to prove who was at fault if information is stolen.

Concerns have also been raised that fraudsters may capitalise on this development by tricking customers into sharing their login information under the banner of ‘Open Banking’.

Perhaps most alarmingly, though, very few people seem to have actually heard about it. As far as revolutions go, this one is remaining firmly within the palace walls so far.

Who needs it?

There has been some real fintech innovation in recent years and months. There are now apps that analyse your spending habits and save affordable monthly amounts on your behalf, and apps that drip-feed your money into your account so you don’t overspend (check out our favourite apps here).

With Open Banking, such apps can get your permission to use your data instead of relying on co-operation from the banks. It could allow innovative firms to develop app dashboards that list all your financial products in one handy place.

It could also make it easier for third parties to assess which bank account is best for you by actually analysing your use. For example, many of us have no idea how much our overdrafts cost us but a company that could access your account could provide far more clarity about cheaper alternatives.

Rachel Springall, finance spokesperson at moneyfacts.co.uk, says that this change could do far more than just make switching accounts easier.

She says it could be used to help get people approved for finance or to allow debt management tools to better recommend current accounts.

“One example of how the data could be used is for those consumers looking to save money for a specific goal who feel that they don’t have enough disposable income. Sharing their data with a budgeting app could uncover some unnecessary purchases and work out where they can save money, whereas before they may not have been as motivated to look deeper into their transaction history themselves. 

“Using an app to easily see every account in one place will be helpful for consumers with multiple accounts from different firms.”

Concerns remain

Those consumers who have actually heard about the Open Data revolution may well be worried about whether shared data will remain secure.

After all, ‘open’ and ‘banking’ are not two words that naturally go together in a world where people have to guard their financial data against fraudsters.

That reluctance could be key in whether new Open Banking rules herald a revolution or a slower, more hesitant pace of change. And that could allow banks a head-start in making use of the rule change.

“Open banking has the potential to transform consumers’ relationship with financial products, but it hinges on consumers’ willingness to embrace it,” said Jeremy Light, a managing director at Accenture who leads the company’s Payment Services Practice in Europe. 

“Until new entrants to the financial services sector can earn consumers’ trust, banks can draw on their extensive heritage to secure an important early advantage.”

Some commentators have sought to reassure consumers by highlighting that Open Banking does not mean a free-for-all.

Springall says: “It’s likely that some consumers remain concerned about sharing their personal information or having it hacked. However, Open Banking was set up to create software and security systems that comply with the data security standards and protect any information. Data is to remain encrypted and any usage of information is tracked. 

“Consumers would need to give companies their permission to access any data and then expressly authorise the bank or building society to supply it.”

Nobody knows

Astonishingly, despite being one of the biggest developments in consumer banking in decades and one that could totally transform how we manage our finances, most people don’t know that anything is changing.

Back in September, the consumer champion Which? carried out a survey that showed 92% of the public had not heard of Open Banking.

What’s more, over half (51%) said they were fairly or very unlikely to consider sharing their financial data, even if doing so would mean they were offered more relevant products and services. 

That reluctance was also apparent in a survey carried out by Accenture. It questioned more than 2,000 UK consumers and found that 69% said they would not share bank account information with third-party providers. In fact, 53% said they would never change their current banking habits and make use of Open Banking rules.

But Dave Tonge, chief technology officer at Moneyhub Enterprise, says that the data security will be at least as robust as existing security protocols such as direct debits, as well as having to be renewed every three months.

He says: “Technology is transforming financial services and will bring huge benefit to consumers, particularly in how they organise and take control of their finances, but one of the biggest barriers remains fear around sharing data. This reflects legacy issues within the sector and also how difficult banks have made it for consumers and new entrants including third-party money management tools.

“There is still…education needed to bring consumers up to speed with just how much Open Banking can improve their financial interaction, through monitoring spending and making better saving and investing decisions.”

 

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Hedge Funds Are Making Money From Exotic Bets

Cheese, sunflower seeds and rough rice sounds like an unappetizing mix — unless you happen to be a hedge-fund manager.

A handful of computer-driven funds had a bumper 2017 by betting on the future price of such “exotic” assets. The success of this type of managed futures strategy, the industry’s term for trend-following, is now drawing new entrants despite the risks created by the low levels of liquidity.

Hedge funds returns have been battered by central bank monetary policies that have made it more difficult for them to outperform the market in everything from bonds to equity futures. That’s prompting some trend followers to move into less crowded markets such as over-the-counter securities, electricity and coal.

Man Group Plc’s AHL Evolution fund, one of the first to enter this niche market, had a return of 18 percent last year. The Systematica Alternative Markets fund run by Leda Braga fared even better, posting gains of 24 percent, according to a person with knowledge of the matter. By contrast, funds that speculated on more mainstream assets and indexes had average returns of just 1.9 percent.

“Exotic markets provide an opportunity to take bets away from the usual macro risk factors,” said Douglas Greenig, the founder of Florin Court Capital and a former chief risk officer of Man Group’s AHL unit. “Sharpening our focus to exotics just made sense.”

Quick Turnaround

In April, Florin Court switched its fund’s strategy to focus entirely on exotic assets. That enabled the London-based hedge fund to turn a first-quarter loss of 9 percent into a full-year gain of 7.6 percent, according to a person with knowledge of the matter.