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Various online dashboards are being launched to help you have a clearer picture of your assets and liabilities
Thursday 21 Dec 2017 Author: Daniel Coatsworth

From January 2018, major UK banks will be required to provide your bank account balances and transaction histories to an investment platform, personal financial planning app or other service provider that you authorise to receive this information.

This will enable you to view your bank account information alongside the other financial information they hold and provide you a more complete and ‘immediate’ view of your finances
in one place.

The platform or service provider must have the required permissions from the FCA, a financial regulator, and you will need to log on and input your bank security credentials to authorise your bank to deliver the information to the provider.

There are detailed rules and requirements in place to protect the security of your data and to ensure it is not misused.

Initially information may only be available for current accounts, from the major banking groups, but over time this will be extended to cover savings accounts, credit cards and loans from all banks. You will also eventually be able to initiate payments from your bank account via an investment platform, personal financial planning app or other service provider.

Evolution of the service

You may think this is not a new service as some personal financial planning apps have used ‘screen scraping’ technology to enable customers to view details of all their bank accounts on an app for some time. However, so far the take-up of these apps has been relatively limited.

The implementation of the new ‘open banking’ rules, and the publicity surrounding them, will (we believe) lead far more people to appreciate the value of being able to view details of all of their savings, investments and debts in one place and give them more confidence that this can be done in a safe and secure manner.

It is important to stress that using such money dashboard services will be entirely voluntary.

Who will offer the service?

AJ Bell Youinvest is expected to be one of the first mainstream investment platforms to launch a service, enabling its customers to view details of all of their savings, investment accounts and loans, in one place, through its secure website or mobile app.

The service, to be called AJ Bell Youinvest Mywealth, is planned for launch in early 2018. It will enable customers to input, and update, information themselves or authorise their banks and investment providers to provide information electronically making use of open banking and screen scraping technologies.

In the banking industry, HSBC will next year introduce a service called Beta which will enable its customers to display information on various third party bank accounts, loans and credit card information in one place.

Several apps already offer limited banking and saving account aggregation services including Moneysupermarket-owned OnTrees, although that proposition is presently closed to new customers due to capacity issues.

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Other examples include Money Dashboard which has a personal finance assistant and budget planner app which aggregates your bank accounts and monitors your spending habits. Pariti is an
app-based service to encourage you to pay off debt and start saving.

Giving you a single view of assets and liabilities

All of these services have a common goal. They want to help individuals to manage their money by providing a clearer picture of current asset values and monetary habits.

Let’s say you have excess cash in your current account earning a poor return. When viewed against investments and debt, you may realise
now is a good time to redeploy that cash to pay down some borrowings such as overpaying part of your mortgage.

You may also want to top up your Stocks and Shares ISA if you’ve not used up your full £20,000 annual allowance. Or it may make you realise that now is a good opportunity to increase contributions into your pension or SIPP.

What is open banking?

Open banking is a general term to describe new bits of regulation including something called PSD2, also known as the European Payment Services Directive 2.

From January 2018, the major UK banks will have to allow their customer data to be shared online with third parties via application programming interfaces (APIs).

Some financial companies and personal finance apps will eventually allow individuals to initiate payments from their bank account, held with a third party, without having to log out of their website (or app) and log on to a second website/app.

For example, you may log on to your ISA provider’s website to view your investments and, at the same time, be able to view details of your current bank account and credit card balance on their site.

Having reviewed this information, you would then be able to initiate a payment to your credit card or make an additional subscription to your ISA, from the same website. That’s far more convenient than having to log in to a series of websites or apps to settle your monthly bills and invest any spare cash.

How will AJ Bell YouInvest's Mywealth service work?

You will find a Mywealth tab alongside your AJ Bell Youinvest ISA, SIPP or dealing account when you log on. From here, you can manually enter as many assets and liabilities held with third parties as you wish.

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This could be, for example, a NatWest current account, Barclaycard credit card, cash savings account with Yorkshire Building Society, a Stocks and Shares ISA held with Alliance Trust Savings and a mortgage from Virgin Money.

You would enter the latest value of each asset or liability so it can be displayed alongside existing assets already held with AJ Bell Youinvest.

The values of your AJ Bell Youinvest accounts will be updated each time your log in but, where you have entered details of other assets manually, you will need to update the values yourself from time to time.

Where information about these assets is available to you online, there will be an option to have their values updated automatically, if you are comfortable providing log-in details to enable this service.

The regulatory regime is designed to ensure the security of your personal data, including any log-in details you provide to a third party aggregator. The information provided to your investment platform on your other assets and liabilities will be encrypted and stored securely and the platform will not have access to your secure log-in details for your other investment accounts.

Potential to transform how people manage their money

‘We believe that the introduction of open banking will lead to a radical change in the way people choose to access information about their savings and investment accounts, and the scope of this change will extend far beyond bank accounts,’ says Andy Bell, chief executive of AJ Bell.

‘The value of being able to view details of all of your assets and liabilities in one place and, if you choose, to have the values updated automatically each time you log in should not be underestimated. This will make it much easier for many people to manage their finances effectively, with a minimum of fuss.

‘We will only send prompts to customers when we can help them,’ adds Bell. ‘For example, customers will be able to set themselves reminders shortly before a fixed term deposit is due to expire, so that they have time to find a replacement, or to remind them to maximise their pension contributions or ISA subscription before the end
of the tax year.

‘Our service will evolve over time in response to feedback from our customers. In time, we may be able to point out to someone they are paying many hundreds of pounds in annual administration charge across their ISAs. By consolidating their ISAs they could cut their administration charges by a certain amount, for example.’

So-called ‘nudges’ are designed to help individuals better understand their personal situation and get the most out of their money. They should also appeal to individuals who do not want to spend time staring at a screen trying to comprehend their overall wealth position, but whom would welcome some basic pointers.

The likes of AJ Bell Youinvest, HSBC and other financial providers won’t provide financial advice in terms of telling you which products to buy or sell. Only companies authorised to provide individual financial advice would be able to suggest specific stocks, funds or bonds.

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Do you keep a record of your assets?

Think about how you currently monitor your assets and liabilities. We believe people fall into three camps: a) don’t keep a record, b) use a spreadsheet or c) write it down in a notebook.

Having a single view through an online money dashboard service would be highly beneficial, in our view.

It may show you have surplus cash sitting idle in a savings account which could be used to clear a credit card incurring high levels of interest.

Or it may help you realise you have too many investments in illiquid assets such as wine or fine art, and that you’re reaching the age when it would be better to have more liquid assets should you require cash at short notice.

What will happen to your data?

Privacy is a big concern around open banking and data aggregation. Individuals will want to ensure their personal data isn’t being used by someone else for monetary gain. The revenue model of some personal finance apps will, in time, involve selling your data to a third party such as an insurance company who may look at spending habits to better assess risk.

Offering these services will cost companies money as they will have to develop sophisticated technology systems. Naturally they will want to recoup that money somehow.

One alternative to selling data to a third party is charging a fee for account aggregation, similar to the way people are starting to pay for data storage in the cloud or the ability to view all social media networks in one place.

Another route may be to offer the service free as a reward for customer loyalty or having a certain amount of assets held directly with the provider.

Most people are used to paying some sort of administration fee with their investments and it certainly seems the banking industry is heading in the same direction. Therefore bundling account aggregation fees in with other charges may not be too hard to stomach.

What’s almost certain is that the concept of account aggregation has much more momentum behind it now compared to 15 years ago. Back then, financial services companies like Egg offered account aggregation services which failed to resonate with consumers as they simply weren’t ready to manage their money in such a way online.

We’re now a nation accustomed to having information at the click of a button and accessing all your assets in a single place is no longer considered a radical proposition. (DC)

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