Why we should all take
responsibility for
financial inclusion

Joe Parkin
Joe Parkin - Head of Banks and Online
Distributors in the UK at BlackRock

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How technological innovation and education are delivering a bright future for wealth management

 “When it comes to the digitalisation of financial services, there is never a dull moment or a bad conversation. It is such an exciting place to be. There is so much to be done and we all have a responsibility for getting it going.”

Joe Parkin, Head of iShares UK, is a man fired up by the potential of the digitalisation of investment. Not just as a way of creating more efficient, more profitable wealth-management systems, but also by the very real opportunity to effect social change in societies where individuals struggling to understand how to manage their money is the norm.

The stakes may be high, and there are numerous challenges to overcome, but as Parkin told delegates at the WealthTech 2019 conference in London in May, “ This is what we are trying to build with WealthTech - a community. A community that has a purpose…a community that accelerates change…a community that helps deliver financial inclusion. ”

New age of wealth management

Parkin, and many others in the industry, believe we are on the cusp of a new age for wealth and asset management. Technological disruption, which has reconstructed so many industries, is now starting to impact on financial services and its arrival could be the catalyst for many major advances. In particular it could solve the age-old question of ‘how do we get more of the population saving and investment money?’ 

Figures unearthed by the BlackRock Global Investor Pulse Survey, which had more than 27,000 responses, highlight once again how the wealth-management industry has huge potential.

It reported that only 3 per cent of people in the UK had access to advice last year and only 6 per cent have ever consulted a financial adviser. The survey concluded that a frighteningly high 12 million people are not saving enough for retirement, and this is especially a problem among women. It isn't just Britons who are not thinking seriously about securing returns on their money. Across Europe 50 per cent of the €26 trillion wealth market is currently in uninvested cash that is earning zero interest. 
Some consumers do not have the desire to invest in the future, while those that want to don't necessarily have the access to resources to help them achieve this.

Parkin acknowledges that solving this issue would entail a big step change for the wealth-management industry. 

“For hundreds of years the industry has been used to servicing a client in a certain way – face-to-face. Everything from the operational systems through to the investment products and how we talk to clients has been set up to accommodate this way of working. It creates a value for the adviser and there is a very important place for them in society, but the key issue is it is not scalable.” 

The industry has responded to this challenge through a series of initiatives of which the most high-profile has been the use of robo advisers. 

“We were excited about the first wave of products,” explains Parkin. “It seemed as if everyone was leaving wealth management to start a robo-adviser company.”

Yet as the recent high-profile shuttering of some robo advisers has underlined, they are not the solution, but rather might be part of the solution. 

Nevertheless Parkin believes that using Hype Cycle representation is usual to asses where we are.  “In the past year we have migrated up the slope of technological enlightenment and reached a key turning point for the financial-services industry.”
Everywhere in the financial-services industry are new initiatives. Challenger banks, such as Monzo and Revolut, are tempting the young with their intelligent, interactive intuitive services. Tech companies, like Apple, are innovating via mobile, and platforms like Facebook could follow their Chinese counterpart WeChat in pioneering social media-based payment systems. 
The banks are clearly concerned and have been looking to create their own challenger banks, quite often in partnership with fintechs. 

“In 2017 the industry felt like a 13-year-olds’ school disco; the  established industry  on one side of the room, the fintechs on the other, both concerned about what collaborating or talking would do,” explains Parkin. “That has changed over the past year as there has been a huge amount of collaboration and not just people thinking fintechs can be the software provider but their partner.”

For Parkin perhaps the most exciting element to emerge is an insight into what could be the endgame for financial services. Companies are not thinking merely about products and services, but a whole proposition.     “Rather than multiple apps and spreadsheets for the services, you need one that understands you and knows when to talk to you about all the different things it can throw at you. It truly is your financial coach,” adds Parkin.

A fresh approach to engaging customers

So in 2019 we have the technology to deliver efficient and scalable wealth-management tools, we have an underlying desire and responsibility to solve the problem of financial inclusion and we have supportive regulatory conditions. 

Everything seems to be in place, but where are the customers? To attract new clients who hadn’t previously considered investing and using financial managers Parkin thinks the industry needs to take a look at its practices and systems – and disrupt itself from within. 

“Historically the industry have done three things to engage people. We have focussed on face-to-face, which is successful but non-scalable and almost impossible to digitalise some parts of an advisers job. Secondly, we have tried to educate people. But educating people who really don't want to be educated is very difficult, too. Lastly we have tried to scare people – telling them you are not doing enough to save for the future. Scaring people is not a great way to start a relationship.” 

It is clear that a new personalised approach is called for – one based around meeting the customer where they are. 

“If you are a 28-year-old who has money for a savings account, you don't need to go through a full-blown retirement journey where you are being asked questions you simply have no idea how to answer,” explains Parkin.

“We need to make sure we address the problems the customer wants solving rather than doing everything at once,” he adds. “Then companies can respond to people’s life changes – having kids, etc – with appropriate products.”

The growing availability of data via open banking regulations also creates new opportunities for the wealth management industry. The data is now available to anyone that the customer permits and so gives access to firms across financial services and beyond.

“If I sign up for a robo adviser then they might understand my age, job and my appetite for risk. There’s little else they understand about me,” says Parkin. “When you take bank account and spending data you get to see which companies I work for, how much money I earn, how I spend that money and even what my favourite restaurant is.”

Parkin believes that financial-services companies can also incentivise people to save. For example, giving restaurant vouchers if they hit their saving goals. 

The right sort of Education is another priority for the industry in general and BlackRock in particular. The BlackRock Global Investor Pulse Survey showed that as many as 97 per cent of 18-24 year olds think it is essential to offer financial education in schools.

“This is a focus for BlackRock in 2019,” says Parkin. “We are working with firms such as KickStart Money and Innovate Finance and others to try and get this moving.” 

Making saving and investing seamless is another key task for the industry. Round-up technology, as pioneered by Acorns in the US and the app Moneybox in the UK, where card purchases are rounded up to the nearest pound and the change automatically placed into a savings account, is just one of a series of ways that consumers can save without them really noticing. ‘Its not about forgoing your morning coffee but still having it and feeling good about it.’ 

Money and wellbeing

Ultimately the main driver for encouraging people to reconsider their approach to money and savings could be the way that society is evolving. Consumers appear to be taking a more holistic view of their health and happiness and understanding how different elements contribute to their wellbeing. Money worries are a key cause of stress, which can have a debilitating impact on a person’s mental and eventually physical health.

“We have a responsibility around financial inclusion. If we can do more around financial health focusing on wellbeing we can achieve the social impact we are striving for in our everyday lives professionally and personally,” adds Parkin. “That's why I am super passionate about waking up every morning and making sure that the school teachers, the firefighters, whoever it may be, understand that the responsibility has shifted from the state and the corporate on to themselves. What should they do with that money, how do they save? I think the industry is taking responsibility and showing we can help them. The regulations, products and the technology are there, we just need to go out with our message.”

“There are 3 parts to a person’s health and happiness – physical, mental and financial. Over the last 10 years, we’ve all become obsessed by our physical health – gym membership has gone through the roof, we all wear Fitbits, it’s impossible to open a paper or a magazine without the latest diet fad. 

“In recent years, there has also been positive developments in terms of our mental health, both state and corporate sponsored, as well as celebrity endorsed. But when it comes to our financial health more needs to be done to get people engaged in their finances, to drive a financial health craze and get people engaged in their finances to achieve their longer term goals and enjoy the later part of their life. This is what gets me up in the morning – solving for financial inclusion. We have the technology to deliver it, a regulator that’s encouraging it, and an industry who is increasing taking responsibility. We now just need to get people engaged.”

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