Ten years on: DIY investing in the age of online technology and open banking
Ten years ago the American investment bank Lehman Brothers became one of the first casualties of the 2008 banking crisis when it collapsed, sending shockwaves throughout the financial world and beyond.
Your thoughts about where we are in terms of recovery will depend upon your personal experience and circumstances; in a recent article for DIY Investor – ‘Hunting for income in the recession that supposedly never happened’ – Retail Bond Expert’s Mr Bond posited that we have been in a steady recession ever since, and served up evidence in support of his perspective as well as a plan for Pussy Galore; shhhocking!
There is much speculation about the future, but markets have recovered and technology has underpinned a quiet revolution in Britain’s financial services industry, changing our everyday behaviour and relationship with money forever.
As high street banks have closed, many more have turned to managing their money online; between 2010 and 2017, the number of branches fell from about 14,800 to 9,690; ATMs appear to be next for the chop.
During that same period, industry group UK Finance said that the number of customers banking online soared 46% from 26m to 38m; those using mobile banking rose from 8.9m in 2013 — the earliest figure available — to 22.2m, with telephone banking declining in inverse proportion.
‘technology has underpinned a quiet revolution in Britain’s financial services industry’
The most recent development is that of ‘open banking’ which is expected to trigger a very large number of mobile applications that will let us manage our finances from a smart phone.
Barclays became the first high street bank to allow customers to use its app via its mobile banking service to view current accounts balances and transactions held with rival institutions Lloyds, Bank of Scotland, Halifax, Royal Bank of Scotland, NatWest, Nationwide and Santander
Open banking aims to improve competition in the financial world by allowing lenders to share customer data, subject to their permission, with regulated third parties such as fledgling digital-only banks who can then ‘pitch’ for their business.
HSBC has launched its ‘connected money’ service, which allows customers to download an app to see current and savings accounts, mortgages, loans and credit cards held with 25 providers, including Santander and Lloyds.
The world of investment has also seen a big shift online as increasing numbers of people have decided to take personal control of their finances.
Technology delivers levels of information, data and tools that would only have previously been available to the chaps with red braces to DIY investors at the click of a button.
With initiatives such as the government’s Retail Distribution Review (RDR) and the FCA’s recent investigation into fees and commissions charged by direct to consumer investment platforms leading to greater transparency and disclosure, there has been heightened awareness of the corrosive effect of fees and charges on pensions, shares and funds, and a large number have tuned to DIY investing.
Many of those that learned that the ‘free’ financial advice they were in receipt of was nothing of the sort because of the kick backs and incentives on offer, opted to DIY; whereas a traditional wealth manager could cost 2%-3.5% a year, those prepared to apply a little elbow grease go do a similar job online for 0.3%-1.3%.
‘Hargreaves Lansdown, has seen a nine fold increase since 2008 in the total sum held by its ISA and SIPP customers to £67bn’
Since 2008, it has become increasingly simple for DIY investors to manage their finances via a smart phone, tablet or PC; those not ready to go the whole hog will find a wide range of services and there will be one that offers the level of support and fees that suit your requirements.
The UK’s largest DIY investment platform, Hargreaves Lansdown, has seen a nine fold increase since 2008 in the total sum held by its ISA and SIPP customers to £67bn; it now has in excess of 1m customers.
Comparison sites such as Moneysupermarket and uSwitch have also come a long way since 2008 with the advent of new ‘auto-switch’ services which do all the heavy lifting for you.; whereas the early sites served up best buy tables and let you get on with it, the auto-switch services do it all for you.
Give them permission to transfer your account when a better option emerges, set up a direct debit, and they do the rest; the largest, Look After My Bills, has 60,000 customers and has been joined by companies such as Labrador, Flipper and Switchd.
The advances in digital banking and financial services has been boosted by ever faster internet services since 2008; the average download speed has leapt from 3.6 Mbps to more than 46 Mbps according to the regulator Ofcom as up to 93% of properties have access to ‘superfast’ or fibre-optic broadband rather than the copper cable that delivered our landlines.