This article was originally written for The Findings, published by Owen James Events as part of their Meeting of Minds programme.

It could be the synopsis for Mission Impossible IV: your mission, should you choose to accept it, is to flog financial products & services in the midst of the worst recession on record, and after some of the biggest names in the industry have cost each family in the country over £4,000, in estimated additional tax liabilities, to bail them out.

You will operate in an environment scarred by the abject failure & subsequent abandonment of the regulator’s principles-based regime, the continued uncertainty surrounding the Retail Distribution Review and its EU equivalent, the ongoing consolidation amongst manufacturers & distributors, and the emerging threat of an additional layer of product-based regulation.

That sounds like a bridge too far, even for the likes of Ethan Hunt & Co.

At the heart of this epic challenge is the issue of trust, or more accurately, the lack of it. The great British public simply does not know who it can trust to look after its money any more.

For many people, that trust in traditional financial institutions has been gradually eroding for the past three decades, starting with the demise of The Man from the Pru and continuing through the endowment mortgage and pensions mis-selling scandals to the present-day bank charges, mortgage fraud and PPI headline-grabbers.

Indeed, the day that The Pru, Royal Liver etc. stopped knocking doors is a very significant one. From that point, traditional financial services product providers and distributors lost the capability to nurture a personal relationship with the mass market. Instead, they gradually shifted their attentions to focus on the more lucrative high net worth individuals. It should come as no surprise that the “Savings Gap” first cracked open around this time.

Today, as the recession hits that mass market the hardest, the industry finds itself being accused of being morally bankrupt as it continues to hunt the whales at the expense of the people who need suitable products & advice the most.

And therein lies the greatest opportunity this sector is likely to encounter for several decades. We really are in the midst of a perfect storm for anyone considering a move into mass market retail financial services distribution.

Arguably, the mass market has perhaps never been more conscious on a daily basis of personal and national finances since the end of WWII. This, coupled with technological advancements which are revolutionising the way we communicate, means that more and more ordinary people are going online to research, discuss and recommend financial products and services to each other, and then purchase across a variety of distribution channels. Remarkably, since the onset of the Credit Crunch, ordinary people have started to save again.

They are not limiting their attention to the traditional scope of financial services. A new medium of ‘micro-finance’ is emerging, which focuses on budgeting and cost control in areas such gas & electricity, mobile phones & broadband, travel & shopping .

Almost three quarters of a million people visited Martin Lewis’ moneysavingexpert.com website in just ONE DAY last week, viewing over three million web pages. They were looking for discount codes, restaurant vouchers, coach & train deals, free wills guides, and the top savings accounts.

It isn’t just information that is being sought; these people want advice and validation of the decisions they are making, prior to purchase. This is the very heart of the opportunity – the mass market is looking for a new source of trusted advice to fill the vacuum left by those now trawling for whales.

Retailers that are considering offering financial services, have multi-channel distribution capability, five-star customer service reputation, trusted brand, integrated social media strategy, and transparent product pricing – your time has come…

Flicking through Financial Adviser (FT Business) after it dropped through the letterbox this morning, I came across this article from Distribution Technology’s Actuarial Director, Danny Quant.

Having initially marvelled at his parents foresight, my eye was caught by the bold proclamation that “It will be reassuring for investors to know that the model used by their adviser has held up in the toughest markets for a generation”. Really?

Danny’s argument is that, because 9 out of 10 model portfolios in his three and a half year example performed better than the 1st percentile prediction, the “outcomes have been in line with expectations”.

I have two problems with this. First, I recall another eminent actuarial fellow telling me that stochastically modelled outcomes below the 5th percentile tended to be so erratic as to be untrustable, and therefore not to be given much legitimacy. Maybe that’s the reason general guidance on presentation of stochastically modelled outcomes suggests that output should show the extremes at the 5th & 95th percentile.

Second, Distribution Technology’s own Financial Plan output from a report I ran in September 2006 is in line with the guidance mentioned above, i.e. showing the 5th, 95th and 50th percentile only. As a result, any investor in possession of such a report probably won’t be able to share Danny’s confidence as they won’t have seen the 1st percentile predictions!

Instead, they’ll be comparing actual performance versus Danny’s 5th percentile, and half of the portfolios have performed below that mark. Indeed,  portfolio 4 (which unfortunately is probably one of the more widely used – sitting in that “Balanced” range between portfolios 3 and 7) is just below the 1st percentile!

So, no, I don’t agree with you Danny, that “actual performance has been show to have occurred within the range of expected outcomes”, and I doubt many investors or indeed advisers will take that much comfort from this piece of nonsense!

Pop back here at 12:15pm on Tuesday 29th September for Fincision’s live blog from Finovate 2009 in New York.

Fincision returns to Manhattan to once again report on the world’s premier finance technology showcase, Finovate, where the best new financial and banking technology innovations from established leading companies and hot young startups get their time in the spotlight.

Handpicked from hundreds, the companies get a mere 7 minutes on stage to demo (no powerpoint allowed) their latest and greatest.

It’s fast & furious; there will be some fantastic presentations, and inevitably the odd ‘crash n burn’ moment. Our live blog will bring you all the action throughout the day; don’t miss it!

The Dealers Group conferences in London & Manchester were great fun, but just a warm-up in comparison to the two big trips that are rapidly approaching…

Next Monday afternoon, I fly out to New York for Finovate 2009, a one-day showcase featuring the best new financial and banking technology innovations from established leading companies and hot young startups.

This year, 32 companies will each have just seven minutes to live demo their latest and greatest; it’s intense, but that’s the way I like it! This is what the Wall Street Journal had to say about Finovate:

“For online personal finance nerds… …Finovate is the Super Bowl and World’s Fair rolled into one.”

Does that make me an “online personal finance nerd”? Technology permitting, I’ll be live blogging the event via the Fincision website from about 1:30pm UK time on Tuesday, twittering in the breaks (@mikelinskey), and furiously networking afterwards. So I guess the answer to the question is yes…

Following Finovate, a much shorter trip up the road to Newport’s Celtic Manor Resort beckons, for the IFP’s Annual Conference starting Monday 5th October. I’m really looking forward to catching up with old & new friends, watching some great keynotes, and having some very interesting discussions about advice distribution platforms, I’m sure!

If you’re around at either event and see me, drop by and say “Hi!”

Mike Linskey’s new presentation on “The Future of Financial Advice”, first given at the Dealer’s Group Conferences “Platforms & Practice Technology” (September 2009), is now available for download:

Many thanks to Jim Bruene and Eric Mattson for allowing use of the Finovate videos, and especially to Bryan Link of Simplifi for the exclusive interview.

Maybe I’m still a bit jet-lagged from the family holiday to the USA, but I’ve only realised (just this morning) that the Dealers Group conferences on Platforms & Practice Technology are only a couple of weeks away!

So, I’ve spent the day researching presentation material, and chasing up a few friends for exclusive content. I’m pleased to report that I’ve managed to secure permission to show video highlights of Mint’s launch of Financial Fitness from Finovate Start-Up 2009 in San Francisco earlier this year, and I’ve also been promised an exclusive video interview with SimpliFi CEO Bryan Link which we’ll be recording next week.

I’ve also managed to get hold of rare screenshots of Google Finance’s very stealth UK personal loan & credit card comparison site; watch out gocompare & moneysupermarket!

Plenty more exclusive stuff to come, including news of a start-up planning platform for advisers that could make some waves when it launches next year.

Going to be a busy weekend playing with PowerPoint…

Looks like I didn’t do too badly last year, as Dealers Group have invited me back to speak at their Platforms & Practice Technology 2009 Conferences in London (15th September) and Manchester (17th September). This time, my session is titled “What can UK advisers can learn from the US experience?” and will cover:

• The future of finance and what this means to you

• The rise of the machines: virtual financial advice

• When digital disaster strikes: a case study

• New distribution opportunities for financial advisers

Expect to see & hear about the latest finance-related web applications coming out of Silicon Valley, innovative new advice platforms for US advisers and consumers, what happens when a web app behaves badly, and the potential for opening up new distribution opportunities in the UK via an exclusive preview of emerging technology.

I’m looking forward to hearing what my fellow speakers have to say about financial technology issues, and I can’t wait for the Dragons Den-style slot, in which 4 big platform providers give 7-minute demos, and will then be grilled by a specially selected panel of hard-nosed critics. The twitter backchannel that will run throughout the day should also liven things up a bit.

There have already been a few platform-focused events this year – some good, some not-so – but I think Dealers Group might just have got the speakers, topics, locations & overall format spot-on this time; worth a day out of the office, I think!

Registration is open here, and there are IFP and early bird discounts available (and 12 CPD points, if you’re collecting). No, I’m not on commission, fees, customer agreed remuneration etc.

Personal finance Managers (PFMs) are the hottest property in Finance 2.0 at the moment. The likes of Mint, Wesabe, Quicken, Buxfer, Thrive etc. (sorry if I missed any of you out, but it’s probably for the best once you read on!) have been beavering away for a year or two now, polishing their tools & marketing messages, and have started to break into the mainstream with credible propositions. Their modus operandi is predicated on the ability to aggregate, analyse and present (in a sexy web 2.0 UI) a user’s personal financial data (i.e. bank account, credit card, brokerage account etc.), advise on improvements, and in some instances, execute against those recommendations. So far, so good; we could all do with that sort of help.

But lets take a step back a bit. How is this data aggregation achieved, and what happens to the data once it’s been grabbed by the PFM? Depending on which PFM you use, the answer ranges from good to bad. Yodlee is the power behind many of the PFMs, and uses what many IT security professionals regard as a security nightmare technique called “screen-scraping” to achieve data aggregation. Yodlee relies on the user to physically hand over log-in credentials for their financial accounts in order to crawl the websites of financial institutions and literally grab the data right off the web page. Does this breach the user’s terms of service for online banking etc? In it’s purest sense, probably. Does this mean the user wouldn’t be ‘covered’ in the event of a subsequent fraudulent use of that online banking service? Maybe. Some of the PFMs try to avoid this issue by keeping the log-in credentials on the user’s desktop (step forward Wesabe; take a bow), but is this enough to keep your personal financial data secure and for your eyes only?

Well, according to twitter user @adambassador, the answer as of about an hour ago is most emphatically no. And here is why:

Rudder messed up

In truth, this was an accident just waiting to happen. The question now: is this just a one-car-wrapped-around-the-lamp-post deal, or are we looking at a Rudder trainwreck?

Looks, unfortunately, as if the answer might be the latter. Ten minutes ago, twitterer @adietz wrote “Getting stacks of emails from rudder.com for accounts that aren’t mine… Thought I would close my account but I can’t log in. Boo Hiss.”So, that’s at least two users who have received a bucketload of email containing other people’s financial data, maybe even yours…

…and no-one is answering the phones at Rudder HQ; I got put through to an answering machine. I’ve tweeted Rudder CEO Nikhil Roy @nikhilroy but no response yet. I’ve also emailed Rudder support for their comments. It’s gonna take a monumental PR effort for Rudder to survive this if the news breaks to a wider audience, and the collateral damage to the other PFMs may result in a number of further fatalities.

This doesn’t look good.

ADDENDUM: I’m certainly not suggesting this is attributable to the data aggregation services these PFMs use; this looks to be fairly & squarely a Rudder cock-up. For the record, Rudder doesn’t use Yodlee for data aggregation; they have a relationship with another aggregator called Cashedge. The purpose of mentioning these data aggregation services & techniques in this post is to provide a fuller picture of the perils & pitfalls of handing access to personal financial data to third parties.

Updates

UPDATE: On May 15th, @adambassador tweeted that Rudder was showing the wrong balance for his checking account, and it’d been like that for 4 days. It’s getting worse; I really did think this was just an automated email problem, but now it looks like there may be data issues too.

UPDATE 2: @alirtsman tweets that “rudder.com just accidently sent me dozens of confidential statements belonging to other customers. time to switch”. Hitting the fan, Rudder; better do something quick…

UPDATE 3: On May 7th, Rudder CEO Nikhil Roy @nikhilroy re-tweeted a link to an article: “Want To Position Your Start-Up To Be Acquired?” Oh dear, this is turning into a real Tommy Cooper moment, Nihil…

UPDATE 4: This from Rudder’s FAQ; hilarious:

“If you’ve signed up for Rudder and you’re not receiving emails, it’s not your fault. It’s the fault of the hysterical legislators who write anti-Spam laws that don’t differentiate between legitimate services like ours and blatantly false (though still tempting) advertisements for penis elongation. The information below will help you correct your email settings in various browsers, thereby ensuring that the life-changing power of Rudder lands in your Inbox instead of your junk mail. Also included are instructions on how to unblock images so you can enjoy Rudder in all its glory.”

To my knowledge, I don’t think any spammer has managed to email pictures of my pre-op tumescence to another individual.

UPDATE 5: If you are a Rudder user, this is the type of personal data they are emailing to other people right now (screenshot courtesy of @adambassador):

content of one of Rudder's erroneous emails

UPDATE 6: @aaronaiken also tweeted: “Rudder.com seems to be having problems”, but that’s nothing compared to what “Dave” has commented on below! Oh dear, Rudder meltdown…

UPDATE 7: Rudder’s Privacy Policy states that users must “…agree to (a) immediately notify Rudder of any unauthorized use of your password or account or any other breach of security”. What happens when they appear to be the cause of the breach? Well, don’t bother trying to phone, tweet or email them; they don’t reply…

UPDATE 8: Game’s up; Mashable & Techcrunch have run the story, and Rudder’s CFO Nikunj Somaiya has come clean (see 2nd paragraph). Other PFMs now scrambling to contain the fallout.

FINAL UPDATE: Over 700 users were compromised by Rudder’s security breach (that’s just under 4% of their user base – based on numbers before this happened, of course!). The breach was caused by an attempt to fix a problem with daily email updates to users, which were being caught in a Yahoo spam filter. Unfortunately, the fix wasn’t tested properly, and each user ended up getting everyone else’s updates too, until Rudder realised their error and shut down the email system. The story is about to trend on Twitter, but Rudder still hasn’t made any effort via their website to tell users what is going on. Users who have either  received 100s of sets of sensitive financial data or have had their own data exposed, have not been contacted by Rudder, either!

I’ve had a week or so to reflect on Finovate Startup 09, as have a number of others, so here’s a few more general thoughts on the state of play in the one particular area of the world of finance 2.0 that interests me the most…

The PFM (Personal Financial Management) space is probably the hot-bed of online financial services innovation at the moment, and there were a number of attention-grabbing developments announced at Finovate. Whilst Mint’s game-play caused a predictable buzz, Wesabe’s white-labelling proposition was the big news. Aaron Patzer, Mint’s CEO, is on record as not being interested in white-labelling his kit to financial institutions (having turned down a few requests already), so Wesabe’s move gives them serious differentiation from their rival. If a few of the big-name institutions decide to back them with white label deals, Wesabe could build up some serious user numbers/ market share. Given a fair wind, this could be a turning point for Wesabe, but they’ll need to become far more aggressive at rolling out innovative new features than they have in the past if they are to win the war.

There’s still plenty of room for someone to come from the back and own the PFM market, and there are signs that some of the newcomers have the wherewithall to do just that. I’ve long bemoaned the fact that the current crop of PFMs concentrate far too heavily on looking in the rear-view mirror at past spending habits, but a couple of start-ups are now starting to extend the scope of the PFMs into ‘proper’ forward-looking financial planning. SimpliFi and Green Sherpa are two such companies, although they take radically different approaches to the problem; SimpliFi is more a digital replacement for your financial adviser, whereas Green Sherpa has an accountancy feel to it’s shorter term cashflow planning tool. Both companies have interesting propositions, but Green Sherpa has an ace up it’s sleeve in it’s proprietory data aggregation technology, which may get spun off into a Yodlee-rivalling product in it’s own right, according to CEO Erin Lozano.

The one thing that really strikes me about the PFM space is just how fragmented it is. Each of the players is engaged in an arms race to roll out ever-more new features accompanied by sexy web 2.0 UIs (ajax, Adobe Air, Silverlight etc.), but there isn’t actually one particular offering that stands out as catering to all of my needs. Instead, I’d have to use at least three different tools to achieve everything I’d like (probably more like five), and of course no-one wants to share their data, so the onus is back on me to sort it all out! There has to be some consolidation in the not-too-distant future, but I fear that even this might not be enough to prevent this latest generation of PFMs going the same way as the pioneers (Microsft Money and Quicken).

Funnily enough, one potential answer to the problem also made an appearance at Finovate, but as a next-gen online banking solution. Although Jwaala presented a similar proposition, it was iThryv’s ultra-flexible online banking platform that really caught my eye, and got me thinking about where the PFMs should be heading!

My current PFM dream-team would consist of…

• Mint’s data aggregation tools and UI,
• BillShrink’s short-term money-saving tools,
• Centrro’s credit scoring-based pre-screeners for lending deals (although I’d want Credit Karma’s what-if scenario planner mixed in there too),
• DebtGoal’s tools for getting me out of that debt quicker(!),
• SmartHippo’s open-source product listings and user community features,
• Green Sherpa’s cashflow approach,
• SimpliFi’s planning focus,
• KaChing’s investment tools,
• Cooler’s, erm, coolness with a trendy green twist,

…and I’d want all of these presented as widgets within a planning platform as clever as iThryv’s, plus an accompanying iPhone app! What price on there being a next-gen widget-based planning platform with everything I desire available by the next Finovate Startup?

For the record, the 300+ delegates at Finovate Startup 09 voted these four companies best-of-show:

• Billshrink
• Prosper
• Silvertail Systems
• SimpliFi

I’m pleased to see at least two of my choices made it onto the list!

Finally, a special thankyou to Jim Bruene and Eric Mattson of Netbanker for organising a very professional conference, and also for my “amazing stamina” mention in despatches; very flattering!

At the tail-end of last year, Matt Davies & I kicked off a project to build a finance-oriented iPhone application. Over the course of just a few weeks, rapid progress was made (and blogged)… …and then we hit “the wall”! Initially, increasing commitments to our clients gradually slowed our rate of progress, but the real kicker was not being able to find a decent, reasonably-priced software development team to build our app.  We’re not the only ones to have come across this problem, either.

It wasn’t just a case of the development effort costing too much – finding reliable, professional iPhone developers with rigorous methodologies and business practices embedded was almost impossible. So, the iPhone project went quiet, and eventually died. Aaaaaah….

But, that’s not quite the end of the story…

Matt & I realised that, although the iPhone app was a non-starter, the basic premise behind it was very sound. Indeed, perhaps we were being too cautious by confining our attention to one mobile platform, when the potential market was much larger! So, Moodoh (the trading style we adopted) lives on; expect to hear more in the not-too-distant future!