CaaS for Asset Managers

CaaS Tool is Developed for Asset Managers

By Ross Laurie, Advisor to Castlight Financial.

For the last couple of years, we’ve talked about how our CaaS (Categorisation as a Service) engine is revolutionising the way lending institutions are helping their customers take control of their finances and demonstrate their affordability credentials for a loan.

As the CaaS engine categorises account holders’ transactional information into 155 different categories of discretionary and non-discretionary spending and a further 29 for income, UK lenders and the millions of account holders they serve, have had unprecedented insight into their financial commitments and spending habits. And they have been able to see exactly where a little belt-tightening could change their financial landscape enough to afford the car loan or mortgage they have set their hearts on.

However, there are also millions of account holders in the UK who are in a very fortunate position. When their transactional data is run through CaaS, it’s clear there’s money left each month after funds have been allocated to the three major “pots” that we’ll call “needs” (things like the mortgage, school fees, insurance and the basic costs of living), the “credit” pot (paying off the car loan and credit cards) and the “wants” pot – cash for holidays, nights out, a new sofa.

The Fourth Pot

But for this segment of the UK population, there’s a fourth pot too, a “savings” pot, perhaps for saving for a car, a new house, a wedding, a child, pension or investments.

This is not a small percentage of UK households. According to figures from the Tax Incentivised Savings Association (TISA), in the £585 billion ISA market alone, there were 11 million ISA subscriptions in the year ending 2017. Roughly speaking, that means about 1 in 2 households in the UK has an ISA investment. So, by my reckoning, for every household who would use CaaS or the Affordability Passport to manage their “needs”, “credit” and even “wants” buckets, there are roughly the same number who could benefit hugely from using our categorisation engine to maximise the effectiveness of the way their “savings” pot and, in particular, their investments are being managed.

The 30,000 pages and over 1.4 million paragraphs of rules from Europe which is MiFID II (The Markets in Financial Instruments Directive) and came into force last year has been developed to improve the way investors’ money is managed.

For asset managers, when their eyes have stopped bleeding from working through the 30,000 pages, MiFID II is all about encouraging them to look in greater depth at their customers’ investments. Are they working hard for them? Do they need re-calibrating due to changing circumstances? Could they get a better return paying down their mortgage than paying into an ISA. Can they even afford an ISA this year, given their daughter’s wedding is coming up? Or are their resources significant and asking to be invested in more complex, higher risk products?

A New Tool

Castlight Financial has good news for these asset managers and the new challenges and opportunities they face, as there’s a new CaaS kid on the block. A “sister” product to the CaaS affordability tool is in development to help Asset Managers provide the best possible service for their customers and achieve compliance with MiFiID II.

CaaS Wealth will use the functionality of the CaaS transactional categorisation powerhouse to conduct a wealth assessment, reporting not only on exactly what and when a customer spends but will also use its trained engine to identify risk patterns and behaviours. This not only gives asset managers an unprecedented level of information on which to base an initial wealth assessment but also equally unprecedented insights into customers’ risk appetites and a tool for ongoing suitability monitoring. Automatically.

We’re talking to forward thinking asset management companies just now and working hard to bring this product to market. Another revolution is on the way. We don’t win awards for our disruptive technology for nothing!