Written by Richard Wake, Chief Customer Officer at intelliflo
The internet has completely changed the way we access information. While I used to pull out my A to Z to find a shop in London, now I just type it into the map function on my phone to get door-to-door directions by foot, car or public transport. It also gives me opening times, customer reviews and a link to the website.
Data has become far more accessible and with it, consumer expectations of the information companies will share with them has grown. People are used to being able to see their shopping order history and banking transactions at the click of a button, which is increasingly setting their expectations for other sectors as well. A growing number of clients want data transparency around their investments and pensions too, with up-to-date and historical information on valuations, performance, asset allocation and holdings as well as access to documents and the ability to see and edit any personal data held. Firms failing to meet these expectations face being left behind by their competitors.
Although many self-directed investors have ready access to this type of information, the problem for many advice firms is that they are not set up to share data digitally in an easy, secure format. Information is often held in different systems that don’t speak to each other, adding to the challenge of creating data transparency.
As well as the client benefits, data is hugely useful to firms too, providing insights into clients, prospects and the market as well as the business itself, including identifying areas for investment and whether processes are working successfully. Effective use of data can have a significant impact on a firm’s ability to improve efficiency, build scale and its future success.
However, there is growing concern among consumer about how businesses are using – or misusing – their data, and the commoditisation of personal information. And of course, there are rules to adhere to around data privacy including keeping sensitive financial information secure. Getting this wrong could at best damage your reputation, and at worst lead to regulatory censure.
There are several steps firms can take to meet these competing demands for data without falling on the wrong side of consumer expectations or regulatory requirements:
1. Ensure proper data management
First, you need to establish what data you currently hold and why. Also, how long do you need to keep it and is it accurate? Delete anything you don’t have a legitimate reason to retain. This is important for two reasons, first data storage has a cost, so don’t spend more than you need by holding onto unnecessary data, and second keeping personal data without good reason will breach GDPR rules.
Ensure accuracy by establishing standard workflows and procedures for identifying, formatting and checking data – making sure it is correct and consistent from the start will save a lot of time in the long run. Technology can do a lot of the heavy lifting in the advice process, but data needs to be accurate to be shareable. Having quality data and a business management system in place that seamlessly integrates with other systems and tools allows you to enter the data once and then use it across the advice journey. This reduces the need to rekey information and the risk of future errors.
Proper data management will support regulatory compliance too. Under GDPR, firms must ensure the accuracy of the client data they hold, while PROD and Consumer Duty require firms to segment clients to ensure suitability, which is far easier to complete and evidence effectively with accurate, accessible client data.
2. Prioritise data security
When thinking about what data you hold, also look at who has access to it, and who needs access to it. Again, technology can help. The right business management system will allow you to share data, both internally and externally, seamlessly and securely and offer programmable rules to specify who can see and/or edit different data sets, ensuring that only those who need access, have access.
Security is a major consideration, especially for firms are handling sensitive financial data. Analysis of by law firm RPCi of Information Commissioners Office data, found that reports of cybersecurity breaches by financial services providers rose from 187 in 2021/22 to 640 in 2022/23. Using cloud-based software and storage also offers the additional protection of the major cloud providers’ security spend and their ability to pool vast amounts of data across their systems to spot and prevent hackers before they reach you.
3. Data transparency
Once you know what information you hold and are confident that your data is accurate, it is easier to decide what information is possible and appropriate to share with clients. No one expects you to share everything, but having always-on access to even fairly basic information like portfolio valuations and breakdowns through a secure online portal gives clients greater control over their data.
Clients can also help safeguard the accuracy of their own data. With the ability to enter, check and update their personal information via a portal, you can reduce the risk of errors going unnoticed and potentially gain additional insight as many clients are willing to share greater detail on their finances when recording it themselves.
Data is becoming increasingly important in financial advice, but firms need to manage it effectively to ensure it meets the business’s need for insight, clients’ desire for transparency and the regulatory requirement for accuracy, privacy and security.
