Open Banking has been a driving force for the reinvention of financial services for a number of years now, with its influence most keenly felt in retail banking, particularly around current accounts and services associated with them. However, with open banking’s transformation into open finance, the entire spectrum of financial services is ripe for transformation.

So what is open finance? Technology vendor FastPay puts it best:

“Financial data such as mortgages, savings, pensions, insurance and consumer credit – basically your entire financial footprint – could be opened up to trusted third party APIs if you agree. Open Banking already allows regulated websites and apps to access transaction data from bank accounts and payment services so that you can ‘move, manage and make more of your money’”

Advisers will be able to see where their financial liabilities are, where efficiencies could be made, and more importantly, this information will be constantly updated

But what does this mean for wealth managers and adviser firms? At the moment, managers only see the financial situation that their customers allow them to see. They know about mortgage repayments, pension payments, other savings outgoings and so on. Effectively a snapshot of a particular point in their customers’ financial lives. Although updated at set intervals (usually yearly) it’s still a static picture of a situation that is by nature fluid.

Open finance will allow advisers to request access to a client’s live financial data. They’ll be able to see where their financial liabilities are, where efficiencies could be made, and more importantly, this information will be constantly updated. It’s a hugely exciting prospect.

This opening up of financial services has the potential to revolutionise the way advice is given. Open finance will clearly generate a large amount of data that needs to be analysed and presented to advisers but this is only really scratching the surface of what is achievable. Because the data is in (or close to) real time, AI algorithms can process it and make recommendations to the adviser based on spending and saving patterns. More straightforward requests can be dealt with by far more effective self-service portals, enabling advisers to focus on providing advice that’s based on a complete understanding of the customer.

Taking things further, wealth management firms could start to offer their clients completely bespoke services - things like tips for managing spending, management of investments held across multiple providers or highly specific investment advice. Even further than that, it allows managers to spot trends in their client base and react to them far more quickly. Are your clients increasingly looking for discretionary advice? Or more exotic products? Simply partner with a relevant firm and integrate systems through an API interface.

As well as providing opportunity for wealth managers and advisers, open finance will also open the market to challengers. As we’ve seen in the retail banking market, open banking has allowed small start up banks to enter the space and begin to steal market share from the incumbents. We’re already seeing signs of challengers entering the wealth space - Robinhood as a pure wealth player, the likes of China’s Ant Financial and Vanguard teaming up in the US and the ever-present threat of Apple, Google Facebook et al - and open finance could provide them with the opportunity to make a concerted effort to push into wealth.

While the full impact of open finance is not yet completely clear, it’s increasingly likely we’ll be living in an “open” world to some degree very soon. What is clear is that wealth managers and advisers need to be thinking about how they will position their business - and their technology platforms - to adapt to a completely new way of doing business.