Anyone who knows me, or has read previous entries in this blog, will know that I have a passionate belief in two things. First, I believe the financial services industry is broken, and it desperately needs to change by putting the needs of its customers first. Second, I believe the best way for this to be achieved is through vastly improved technology combined with human empathy and understanding.
So, I’m excited that today Octopus has announced its acquisition of the Bath-based wealth technology business Seccl. At the moment, the deal is subject to regulatory approval, but once this has been granted, Seccl will be joining the Octopus group of businesses. I think this move into wealthtech changes the game, both for Octopus and for the financial services industry.
For far too long, the banks, building societies, insurance companies and investment companies have held all the power in their relationships with customers. These companies have profited from having a mostly unknowledgeable customer base. But just as it has across a number of other industries where consumers have been treated like children, technology has the power to fundamentally challenge this dynamic.
The financial services industry still doesn’t ‘get’ technology
Ask anyone on the street whether their experience of financial services companies is ‘frictionless’ and they’ll probably laugh out loud. The industry hasn’t shaken its reputation for being inefficient and outdated, and to date, it certainly hasn’t embraced technology in the right way.
Robo-advice is just the latest example of financial services companies offering their customers the worst of both worlds. It’s the answer companies come up with when they’ve asked the wrong question. As a business model, robo-advice is primitive at best. Yes, it makes it easier, and cheaper, for people to save and invest. But at the same time, it doesn’t help them plan for the future and it can’t help them deal with the unpredictability of life. Financial planning, on the other hand, does.
Technology means democratisation
There’s so much to learn from other industries. The best tech-driven companies have devoted their huge resources to enhancing user experience and smoothing the buying process, while also offering greater choice, convenience and value for money.
Change has been driven by a determination to remove friction and complexity. Users feel empowered in their decision-making, and free to walk away if the experience involves too much hassle, or if the outcome is disappointing.
This democratisation within complacent or broken industries has resulted in new winners and new losers, but overall has greatly benefited the customer. But within financial services, where changes have been much slower to implement, it begs the question of why change has been taking so long.
Financial services should be about giving people financial freedom
For me, the purpose of money is to enable people to live the life they want. It’s never about stock market returns, or interest rates, or financial engineering. The financial services companies that ultimately gain the trust of customers will be those that have seamlessly integrated technology into the way they do business. They will use and mine data to understand the decisions their customers are making, but they won’t adopt technology at the expense of the human element.
Customers will feel good about choosing these companies, because they recognise they are having a positive influence on their lives and the lives of their families.
It’s all about how you make people feel
Trust and choice are the two factors at the heart of all of this. People don’t choose to go to a financial adviser or seek out financial planning in order to buy a product. They go when their circumstances have changed, or when they want to make plans for the future and don’t know how to achieve them.
The value of financial planning is the comfort people get from talking to someone who’s an expert at what they do. People feel better after talking to a financial planner, just like when they go to see their GP. This is something people will continue to pay for.
That’s why Octopus remains deeply committed to financial advice. We want to encourage more people to recognise the benefits of financial advice, and to appreciate the long-term benefits of financial planning. But at the same time, we want to give financial advisers the tools they need to be able to offer the highest quality financial advice to a much broader client base.
Financial planning needs to be delivered with empathy and understanding, and companies need to find ways to use technology that give more people the life they want, but to achieve this, they need to make human interaction scalable, not just for tens of clients, but thousands.
To get there, we need to start adopting the thinking and processes being used by other tech-enabled industries. Which is where Seccl comes in.
I won’t explain the technical benefits of using an open Application Programming Interface here. If you want to know the specifics of what Seccl does, I suggest you take a look at this blog written by our Growth & Innovation Director Sam Handfield-Jones.
Sam does a great job of describing in greater detail the problems that open API can solve, and why we’re so excited about pairing Octopus businesses, products and services with Seccl’s technology. But I will say this: the advantages go much deeper.
The introduction of Seccl technology within Octopus has the potential to improve the lives of hundreds of thousands of people over the next decade.
It will enable us to remove the friction and complexity from the full complement of financial services products they use, replacing it with a centralised and fully integrated marketplace where everything is seamlessly connected: from banking and budgeting to insurance, pensions and investments, and even money transfers.
Exciting times ahead
Ever since we launched Octopus in 2000, I’ve wanted the Octopus brand to be considered so profoundly trustworthy, frictionless and helpful, that our customers no longer think of managing money as a chore to be avoided, but one that they feel so in control of that they are happy to recommend us to the people they are closest to.
The financial services industry is changing, and there’s a very real opportunity for companies like Octopus to think big and to think differently. With the acquisition of Seccl, we can build a financial services platform capable of reaching hundreds of thousands of customers, and of making every single one of them feel like they are in good hands.
I think that’s an incredibly exciting prospect.