The Monetary Policy Committee and Federal Reserve regularly tell us that they make crucial decisions, for example on interest rates, based on the data.
Politicians state how key decisions are based on what the data conveys. And if you manage a Fantasy Football team, you will likely select your players after analysing the data.
Data plays a more significant role in everyday life than ever before. And so, it is no surprise that the Financial Conduct Authority has been saying for years that it is a data-led regulator.
When your regulator is focused on data, there are clear benefits of ensuring your firm has good quality data. However, the benefits of meaningful data go far beyond just regulatory compliance.
A pointless battle: When client outcomes clash with compliance
As consolidation grows apace in the sector, acquiring firms want to analyse key firm data prior to an acquisition. From external compliance reports to file review grades.
How many clients did not receive an annual review meeting to how many clients receive different processes due to their vulnerabilities – in short, an abundance of data is requested before an acquisition decision can be made. It does not reflect well if your firm does not have the requested data.
Over the years, I have heard hundreds of firms say that they want to enhance their data, while only a handful have said that they believe they have all the data they want. With that in mind, here are a few examples of how firms can enhance their data.
During review meetings, there is the opportunity to collect more valuable data
Ongoing advice reviews has been one of the hottest topics in the Wealth Management sector for over two years now. Everyone is aware that the FCA asked firms to provide data on the number of reviews undertaken and missed reviews since 2017. Many firms struggled to produce this information when requested, especially in the given timeframe.
Yet, if you have a new business register and/or client management system that records if a client is paying for an ongoing service, the frequency of their review meetings, the date the reviews are due, the date the review meeting happened and the date the post-meeting review took place – then any questions from the FCA should be easy to respond to.
However, the benefits go far beyond meeting the FCA requirements. This data helps ensure that your clients are getting regular reviews, benefitting them and your business.
During review meetings, there is the opportunity to collect more valuable data, such as which clients have protection or IHT needs. This leads to customer needs being met, improved customer outcomes and more profitable businesses.
Recording the client’s total assets means that you can easily identify clients who have or could potentially have an IHT liability
Retirement income advice is another area where firms can benefit from enhanced data. For example, knowing how many clients are in decumulation, how many of these clients have had cash flow analysis undertaken in the past year, and how many of these are in danger of running out of funds in their lifetime is beneficial.
For its Retirement Income thematic, the FCA published a useful example of data that can be captured in a new business register. This could included the client’s ATR and CFL.
Recording the client’s total assets, including their primary residence, means that you can easily identify clients who have or could potentially have an IHT liability. Having this data available at the click of a button will make it easier to identify the clients you need to speak to as a priority before the IHT changes come into force in 2027.
Firms at ‘breaking point’ as compliance regulation intensifies
As well as benefits for your business and your clients, better data will, of course, also help with regulatory compliance.
In December, the FCA stated that better quality data was an area for firms to improve in relation to Consumer Duty board reports. So, this is something firms should be working on now to ensure the data in their next board report meets the regulatory expectations.
While it can feel daunting to update processes to enhance your firm’s data, such as making changes to your new business register, the benefits are clear. And any short resource requirements will be outweighed by the future benefits to your firm and your customers.
David Boyhan is technical director at TCC
