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Why Financial-Data-driven Personalisation is the Future of Wealth Management

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By Jody Bhagat, President of Americas and Nicole Meyers, Vice President of Strategic Accounts at Personetics

 

Finance is in the midst of a digital revolution

A decade ago, a personalized approach in wealth management meant a phone call from your investment advisor with new investment opportunities, and a discussion of why it may be a good fit. Now, consumers flick between savings apps that automatically round up your change or robo advisors that manage your investments without your having to brush up on market trends.

Companies like Netflix and Amazon have normalised personalised recommendations on content or products based on what we buy or view. Investors are no different in how they see their finances.

What’s being called ‘autonomous finance’ technology is democratising access to kind of advice that would previously be available to only the most affluent or profitable of clients.

Forrester defines autonomous finance as algorithm-driven services that make financial decisions and take action on a customer’s behalf.” In plain English, this means analysing customers’ transaction data to provide personalised insights and advice in real time, as well as automating tasks to help customers reach their goals faster with less manual input. This means moving the financial-stress burden from the client to financial institution, and so improving their financial wellness.

Jody Bhagat

Financial institutions can now provide incredibly tailored insights to large, medium and small investors, as well as their advisors, at an enormous scale.

This also opens up personalised wealth advice to a much wider audience of customers. For example, helping mass market customers manage debt and build savings, giving mass-affluent customers help with saving for a goal or maximising retirement contributions and, for affluent customers, sharing automated insights with wealth advisors and minimising cash in low-interest accounts.

Sure, it’s taking time for the industry to embrace new technology, but there’s no denying the way the wind is blowing.

 

What does this really mean for your business?

The journey to achieving the full potential of autonomous finance involves four stages:

  1. Data enrichment
  2. Personalised insights and advice.
  3. Unified advice across channels.
  4. Fully autonomous finance.

 

Data enrichment

First, you need to aggregate, clean and enrich your transaction data to allow customers to understand what is happening with their money. On a basic level, this means categorising their inflow or out flow transactions to let them know what they’re spending on, or what happened with their investment portfolio.

This gets really interesting when you’re able to build a complete, holistic financial activity map of the customer. Seeing whether someone is a gig worker with irregular income, or has a mortgage, or whether a regular payment always comes out when their balance is low.

 

Personalising insights and advice

This means not just giving information about a person’s finances, but also advice on what financial action they should consider taking.

This involves taking the cleansed data and running a series of AI or ML models to deeply understand patterns and predict future trends that are important for the customer and their finances. For example, this could be that their portfolio has moved out of their preferred risk tolerance band.

 

Unifying this advice across channels

This growth in data-driven customer insights won’t diminish the trusted role that financial advisors and relationship managers play, but in fact supercharge it.

These data-driven insights will also provide helpful information for relationship managers so they can provide more tailored and informed advice to customers. For example, if they know that a customer has excess liquidity in their checking account after all expenses have been paid, the relationship manager can intelligently recommend where those funds could be invested.

 

Autonomous finance nirvana 

Across the pond, U.S. Bank is already using an automated solution to help customers invest, by identifying how much spare cash they have at the end of the month and directing them to an investment account.

More recently they launched a service called ‘Pay Yourself First’ which lets the customer set a target amount to transfer, but then performs analysis when their pay check comes in to inform them if their circumstances have changed and if they should reconsider this month’s transfer.

While autonomous finance in the wealth management industry is still in its infancy, we’re already seeing 25 to 40% of end customers engaging with data-driven insights on a monthly basis and our data suggests financial institutions are subsequently seeing 5 to 7% growth in new accounts.

Implemented successfully, data-driven personalisation creates a virtuous customer flywheel where increased customer engagement and satisfaction leads to deeper relationships and a stronger customer franchise. The opportunity for the wealth management industry is huge – the challenge now is putting this into practice.

 

Finance

Mini-Budget 2022:

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Tax giveaway is a boost for business, but will it drive growth or fuel inflation?

 

Chancellor Kwasi Kwarteng has announced a comprehensive wave of tax cuts and other incentives for individuals and businesses, as well as confirming some of the announcements made earlier this week.  The measures are part of a new Growth Plan, which is aiming to boost economic growth. However, only time will tell if they will curb inflation and temper recession concerns.

Richard Godmon, tax partner at accountancy firm, Menzies LLP, said:

“With another fiscal statement to follow, this mini-Budget is a defining moment for the new Government and tax cuts are firmly back on the agenda.

“The biggest surprise was the decision to simplify Income Tax by moving to a single higher rate of tax for high earners of 40%, with effect from April next year. This will encourage a spirit of entrepreneurialism by incentivising work and putting money back into the economy. The flip side is that the Government might also be hoping that the move increases the tax take, as it could help to draw people back to the UK who may have previously chosen to live and work elsewhere, while encouraging others to stay put.

“The reduction in dividend tax rates and the abolition of the additional rate of tax from April 2023 means that business owners will need to consider carefully the timing of dividend payments over the next few months.”

Up to 40 new Investment Zones

The Chancellor also outlined plans to create up to 40 new ‘investment zones’ in England, with the potential for more in Wales, Scotland and Northern Ireland. Businesses in these zones will benefit from wide-ranging tax breaks including 100% tax relief on investments in plant and machinery, and no National Insurance Contributions will be payable on the first £50,000 earned by new employees.

Richard Godmon, tax partner at Menzies LLP, said: “The new Investment Zones are reminiscent of the former Enterprise Zones, but they will provide a much more favourable tax environment for businesses and they promise to become a magnet for inward investment. There are currently 38 areas in England on the list for consideration and we look forward to finding out which ones will be selected.”

Incentivising business investment and Corporation Tax rise ‘cancelled’

The limit of the Annual Investment Allowance (AIA) will not revert to £200,000 as planned in April next year, it will now permanently stay at £1 million.

Richard Godmon, tax partner at Menzies LLP, said:

“Capital allowances are highly valued by businesses and they will be pleased that this one in particularly is going to stick at £1 million and that this is no longer being described as a temporary measure, but is to be made permanent.

“The decision to cancel the planned increase in Corporation Tax (due to tax effect next April) will be a relief to many small and medium-sized businesses who have been concerned that this increase would erode profits further and make it even more challenging to remain viable.”

Incentivising entrepreneurial investment

The Chancellor highlighted plans to increase the cap on investments that can be made under the Seed Enterprise Investment Scheme (SEIS) from £150,000 to £250,000. Individuals making investments in start-ups up have had the limit doubled to £200,000, with the 50% income tax relief remining the same. The Government also gave its commitment to continuing to back the Enterprise Investment Scheme (EIS).

“These announcements send a signal to entrepreneurial investors that tax should not be a barrier and the Chancellor wants to expand incentives in this area,” added Richard Godmon, tax partner at Menzies LLP.

Stamp Duty Land Tax

The threshold at which Stamp Duty Land Tax (SDLT) becomes payable on residential property purchases in the UK has been raised to £250,000, double its previous level in a bid to boost the property market. In addition, first-time buyers will not have to pay SDLT on property purchases up to a value of £425,000 (up from £300,000). Both measures will take effect from today.

Richard Godmon, tax partner at Menzies LLP, said:

“The decision to raise the SDLT threshold is designed to build consumer confidence and boost the housing market generally. For property developers it will fuel activity by creating demand, particularly from first-time buyers, and help to free up finance to front-end development projects.”

IR35 Changes

Richard Godmon, tax partner at Menzies LLP, said:

“The repealing of the 2017 and 2021 IR35 changes will be hugely welcomed as it will remove an administrative burden, risk and cost, enabling businesses to devote resources to furthering their growth strategies.

“It is important to recognise that IR35 has not been abolished and the result of the changes is that the risk and compliance costs are being returned to the individuals and their personal service companies.  HMRC will no doubt redirect their focus towards the contractors, which will bring challenges and make enforcement more difficult.”

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Anyone Can Become an R&D Tax Expert with the Right Foundations

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Ian Cashin is a Customer Success Manager at Fintech company and R&D tax software provider WhisperClaims

 

For accounting firms, R&D tax credits offer a substantial opportunity to boost revenue and strengthen client relationships. According to Ian Cashin, Customer Success Manager at WhisperClaims, perceived complexities can be overcome with the right approach and support. Indeed, by embracing a few simple practices, any company can become an expert in R&D tax.

Building Confidence

Growing revenue through new business is far more challenging than unlocking revenue from an existing client base. However, a significant number of accounting firms are losing out on value-added opportunities as a result of their lack of confidence or knowledge in R&D tax relief.

Yet, advisors who follow best practice are now in an ideal position to use their extensive client knowledge to mitigate their clients’ risk of and potential exposure to interrogation over fraudulent claims, ahead of HMRC’s introduction of more stringent R&D tax processes in April 2023.

So why are firms reluctant? There is no doubt that the R&D tax credit procedure is different. Compared to other areas of tax regulation, it leaves greater room for interpretation. But it is readily understandable by a qualified accountant – even an unqualified trainee. Understanding what HMRC considers to fall under the scope of research and development is key. Astrophysicists and Formula 1 manufacturers are not the only people who employ science and technology to overcome business challenges. Every day, UK firms of all sizes engage in R&D activities, from civil engineers to food manufacturers, yet far too many have not yet filed claims, losing out on critical cash.

The most important thing to keep in mind is that, as an accountant, you already have a far deeper relationship with your client compared to any other service provider. Once you have raised your level of understanding, you are in the perfect position to optimise this.

Leveraging  Insight

Accountants already have a unique understanding of their clients’ operations –  insight which,  as professional advisors, will help to highlight companies most likely to qualify for an R&D tax rebate. Furthermore, with access to tools like R&D tax claim preparation technology, developed by R&D tax professionals, they are able to significantly speed up the process. This technology enables accountants to easily determine the top targets within their client base, indicating where to focus the efforts of their emerging R&D tax service.

Using this priority list in conjunction with their understanding of the criteria HMRC stipulates, an accountant can leverage their client knowledge and relationship to engage in a conversation regarding daily R&D activities and unlock potential tax relief opportunities.

Moreover, facilitated by a specialist R&D tax claims preparation platform, accountants can be assured of a structured process that prompts the right questions to ask clients during these conversations, and highlights answers that are either in sync with, or fall outside of, the HMRC parameters. For instance, ca restaurant owner adding vegan alternatives to the menu is not on the same level as a food producer starting the development and manufacturing of a fully plant-based product line. The latter will undoubtedly be eligible for R&D tax assistance, but not the former. Accountants should use their position as “professional advisors” in this situation to push back against clients, especially those who may have previously been unwittingly misled.

Best Practices

For the last twenty years, since the introduction of R&D tax rebates in 2001, best practice has been the provision of a detailed report, complementary to the CT600 form, to mitigate the chance of HMRC asking supplementary questions. The technical purpose of the claim as well as the business context must be covered in this report, e.g. the challenges faced; how science and technology were used to overcome these; and the professionals employed who overcame them. Simply put, if the challenges weren’t difficult to solve, it wasn’t R&D.

It’s also critical to keep in mind that R&D claims cannot simply be copied and pasted from year to year. R&D is not necessarily a constant; demand for it changes in line with the evolution of the business’ activity or stage of development. as businesses change and go to the next stage of development.

The accountant’s already solid client relationship and interpersonal abilities come into their own in such situations. Particularly if the appropriate course of action is to suggest that the client should not submit an R&D claim, an accountant must feel comfortable advising the client accordingly. The claim belongs to the client; if it is contested, the client will be the one facing an HMRC investigation. An advisor must be self-assured enough to refuse to input erroneous claims without endangering the client relationship.

Conclusion

Recent years have seen accountancy firms strengthen their position as dependable, trusted business advisors. Discussions regarding a business owner’s long-term objectives, succession and exit plans, as well as pensions and investments, have become commonplace. It should be natural to include R&D tax into these conversations . Asking a customer about their investment in R&D should be a common practice – business as usual –  just as it is to inquire about investment in infrastructure or buildings.

The only thing preventing accountants from successfully adding R&D tax to their suite of services  is a lack of confidence. Yet, any reservations can be addressed with a straightforward ‘back to basics’ R&D training course, as well as using technology to gain access to a completely new revenue stream with their current clientele. Now that HMRC is openly calling for a much more rigorous, trusted, and evidence-based approach to R&D tax from 2023, accountants hold all the cards they need to gain confidence and give clients the trusted service they desire.

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