Handling new regulation is always a challenge, but it also presents an opportunity to adopt technology to make things easier.
This was the approach of the fintech companies that took part in Morningstar and PIMFA’s Duty of Care Tech Challenge, a tech sprint to develop solutions that will help advisers navigate the new Consumer Duty regulation from the Financial Conduct Authority (FCA).
Together with the trade association PIMFA’s tech arm PIMFA WealthTech, Morningstar invited fintechs to a tech sprint to address the regulation, which came into force at the end of last month and aims to protect consumers and raise service standards.
We tasked participants with creating tools for understanding customers, with increased control and personalisation. Using Morningstar APIs, the participants developed technological solutions where wealth managers are able to navigate Consumer Duty rules around communicating information in clear, fair and not misleading manners.
Eight companies participated in the sprint, which was judged jointly by Morningstar and PIMFA. The four best solutions presented their product at the Morningstar Investment Conference UK in London this summer.
Impressive Results
As my colleague James Gard wrote when the regulation came into force, the Consumer Duty is an attempt to promote good outcomes, reduce scams, and help vulnerable people access products at affordable prices.
In the regulator’s words, financial companies will be expected to provide helpful and responsive customer service, equip their customers to make good decisions through communication people can understand, and provide products and services that meet consumers’ needs and work as expected.
The participants had access to Morningstar Portfolio Analysis APIs covering asset allocation, geographic breakdowns, sector breakdowns, ESG metrics, risk scores, goal analysis and costs.
At the end, InvestSuite and Figg were crowned joint winners by the Morningstar Investment Conference audience.
Figg aggregates data to provide a collected view of, and intelligence around a user’s wealth, collecting information across custodian types from pension providers, private and retail banks, as well as alternative valuables such as art, cars, wine collections, and real estate.
CEO and founder Sahba Hadipour explains that in order to address Consumer Duty, his company developed a “privacy-first reporting engine” using Morningstar data.
“The reporting engine anonymously sends the user’s portfolio to Morningstar X-Ray, then using our fine-tuned generative AI model, we created a report explaining investment sectors and geo-diversification,” he says.
“The information then takes a deep dive into each sector, explaining the ROI of each stock within that sector in 12 and 36 months, providing the user with insights about their short and long terms returns.”
Addressing the need for digestible reports was among the key challenges the various fintechs wanted to address. Fellow winner InvestSuite, a company which offers white-label solutions for portfolio construction, investment platforms, and investment insights and reporting, also went down this route for the tech challenge.
It set out to reimagine hard-to-read reporting formats with an engagement touch, so that investors would be able to not just read, but also understand the content. To do this, the company used a storytelling format, mixed with AI and natural language processing, to break down financial reports.
In the showcase, InvestSuite explained:
“When you open a Storyteller report, you’re not just reading numbers, you are embarking on a journey. Like any great story, every report has its heroes and villains. We guide you through the rising action, painting a vivid picture of your portfolio’s performance. Through news, deep look-throughs, and fresh perspectives, your report becomes more than a simple update. It’s a thrilling narrative that’s both insightful and engaging.”
The tool also incorporates ESG and impact data, available on various devices, and in video format.
Runners-up MoneyHub and R2 also presented their solutions at the Morningstar Investment Conference Showcase.
Speaking to the adviser-heavy audience, MoneHub’s managing director Vaughan Jenkins explained one of the key concerns for advisers looking to fulfil their consumer duty obligations.
“There is no shortage of content out there, there’s a shortage of attention and there’s a shortage of patience amongst clients, and there’s a shortage of time,” he says.
“And you will be judged against the best customer experiences they find out there.”
Moneyhub created a one-stop dashboard view of investments, tracking suitability, affordability, eligibility, and vulnerability. The platform is also able nudge client and adviser to course correct if the current investment style seems like a mismatch.
Meanwhile, 2R Squared’s solution, was developed to improve information flow across the business to allow front office to better serve the end customer. Founding director Rajesh Amin explained this will allow the client and coverage person to have interactive conversations and adjust portfolios for bespoke objectives, taking into account historical data, forward projections, ESG considerations and goals. It also allows for real-time comparison between current strategy and any changes.
The Debrief
Commenting on the results from the Tech Challenge, Keith Phillips, Executive Director of PIMFA WealthTech, says the role technology can play in helping firms meet the new requirements of the Consumer Duty and serve their clients better has the potential to be enormous.
“We’re delighted to be working with Morningstar on this important Tech Sprint and invite fintechs that work in this space to participate and show the wealth management industry the type innovation and support they can offer,” he says.
Anastasia Georgiou, Morningstar’s director of client solutions, advisor segment, EMEA, says these solutions could be pivotal to helping the industry find new, innovative ways of communicating with customers to help them understand financial products and services.
“Morningstar is the principal strategic partner to PIMFA WealthTech and together. The joint ‘Tech Sprint’ series has been designed to address common issues within the wealth management sector where a technology solution could offer the most effective solution for all parties”, she says.
“The Consumer Duty sprint is the first in this series and was designed to examine how customer-focused technology can be best deployed to support the needs of wealth managers within the requirements of Consumer Duty.”
