How open finance is transforming advice

As a financial adviser, you rely completely on the financial information that customers choose to provide you with. This encompasses mortgage payments, pensions, savings, investments and outgoings. But it’s really only a freeze frame, when what you need is a widescreen moving picture

Open banking is nothing new. It’s been driving change in retail banking for some time. But it’s steadily growing into a force that can affect the whole of the financial services industry known as open finance: an altogether broader concept that opens a customer’s whole financial life to trusted third parties, including professional advisers

How open finance is transforming advice

 Open finance provides you with a level of clarity by allowing you to gain access to your customers' live financial data. Vitally, this rich vein of data is constantly updated, so you will be able to see the full range of liabilities, virtual real-time changes, and how to pinpoint improvements and efficiencies.  


A little background  

Essentially, open banking involves granting access to your bank accounts to a third party, through the use of application programme interfaces, or APIs. With your consent, the third party can then access financial data and even ask the bank responsible for an account to make transactions. The UK has been a notable early adopter in the development of open banking. 

Here are some key steps in the process. 

  • 2016: The Open Banking Implementation Entity was founded. It’s responsible for implementing central standards and industry guidelines for the development of the APIs required to support open banking 

  • 2017: The UK’s Competition and Markets Authority ordered the nine largest UK banks and building societies to open their current accounts and help to implement common API standards 

  • 2018: A revised payment services directive or PSD2 was implemented into English law through the payment services regulations (PSRs). This acts as a catalyst for the growth of open banking, as it provides a legal obligation for all payment service providers to supply regulated third-party providers with access to online payment accounts they maintain. 

The introduction of PSRs and the opening of third-party access to accounts launched and powered open banking, with the industry harnessing new technology to bring new products and services to the market. Today, it’s easier to manage cash flow, invoices can be paid seamlessly and businesses can track expenses across multiple accounts and better manage their financial health.

The initial idea of open banking has grown into open finance, which runs on the fundamental principle that data supplied by and created for the users of financial services is owned and controlled by these customers, not just financial institutions. So, what does it mean for the financial adviser?  


The advantages of open finance for advisers  

The era of open finance is a really exciting prospect for advisers. Because you can now gain access to live financial data, there’s far greater potential for pinpointing where efficiencies could be made, or advantages might be gained. In short, this opening up of financial services is a revolution. 

Timing is key. Now data is available in close to real-time, you can use AI algorithms to process it and develop recommendations, based closely on spending and saving patterns. Everyday admin and customer requests can be processed using self-service portals, creating valuable time for advisers to focus on what really matters: providing advice that’s based on a deep and accurate understanding of the customer. 

There’s real potential here for offering truly bespoke, individual advice and services. For example, advisers could make recommendations and tips on spending, the management of investments held across various providers and specific, targeted investment advice. Looking at the bigger picture, the new level of rich data should enable advisers to spot patterns, shifts and trends — and react quickly to them.  

Ultimately, open finance allows advisers and their customers to create highly personalised financial ecosystems that can be fine-tuned, improved and managed using financial management tools and the wealth of data that they unleash. The role of the adviser in this future is more individual, potentially much more effective — and ultimately more satisfying for all concerned. 


Open banking and open finance at a glance  

The potential positive impact of open finance is wide and growing all the time. Here are some of the key advantages for retail banking, business customers and ultimately financial advisers too. 

  • Gain a single view of accounts spread across different banks 

  • The latest financial management tools and data analytics allow you to identify spending patterns, for better budgeting and saving 

  • Products can be tailored using transaction history 

  • You can gain increased access to customers with previously limited available financial data 

  • Businesses can integrate their accounting and tax services 

  • Business cash flow and deposit management can be improved 

  • Uniquely tailored lending based on accurate account data analysis can be offered 

  • Open finance provides a very customer-focused business model 

  • Data analytics capabilities are powerful and always developing 

  • The technology platforms are seamlessly integrated and provide reassuring levels of security 

Revenue opportunities created by open banking and finance by 2022: £7.2 bn 


Potential advantages attract potential competitors 

While open finance creates exciting opportunities for advisers, it also opens the market to new players — competitors attracted by new potential. It’s already happened in the retail market, where small, agile start-up banks have grabbed market share from larger established names, and new challengers are starting to enter the wealth market too. 

China’s Ant Financial, and Vanguard have joined forces in the US, while global brands such as Apple and Google will not have failed to notice the opportunities presented by the open finance landscape. 


Be ready for the open world 

Open finance is not a new development, but it is in its infancy. The full impact is not yet clear, and no one can predict all the opportunities and potential pitfalls just yet. What we do know is that we’re all operating in an open financial world, and now is the time to consider how best to position your technology and your business to best serve your customers and prosper. 

Join the 27,000 independent financial advisers who use Unbiased to grow their business. Discover the plan that’s right for you. 

About the author
Craig Rickman
Craig Rickman is senior content writer at He has been writing about personal finance and wealth management since 2016, including four years as a journalist at the Financial Times Group. Prior to this, Craig spent eight years working as a regulated financial adviser. He holds the CII level 4 Diploma in Financial Planning.

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