October 19, 2018
More often than not legislative change tends to sneak under people’s noses — but few people in Europe can have been unaware of the arrival of GDPR early this year, as panicked firms sent out a tidal wave of (largely unnecessary) emails asking users to consent to receiving marketing emails.
But for financial advisers, GDPR (the General Data Protection Regulation) is just one of several changes which are shaping the future of financial planning.
These range from 2012’s RDR (Retail Distribution Review), to the huge, sweeping changes brought by MIFID II (Markets in Financial Instruments Directive) last year.
Other changes such as PSD2 (Payment Services Directive) and Open Banking are also changing the way financial advisers work.
For consumers, the likes of GDPR and MIFID II deliver obvious, hard benefits.
Companies are now required to be much clearer about how data is used, and what (for instance) a charge actually pays for, when choosing a financial instrument.
Clearly recorded audit trails mean that customers (in theory at least) should be able to trust financial professionals like never before.
Likewise, changes brought by PSD2 and Open Banking deliver customers more control over their data — and more clarity when comparing different accounts and products.
It’s a huge amount of change to deal with in such a short period, but for financial advisers, it’s actually an opportunity, says Steve Andrews, Head of Managed Services at Focus Solutions.
Providing customers with confidence about what they are paying for is an overdue change, as are the increased requirements for a ‘paper trail,’ says Andrews.
The changes also won’t make a huge difference to the way advisers actually work.
‘If you’re paying money, you should expect a level of performance,’ Andrews explains. ‘If you’re paying someone to do a job, it should be monitored.’
But the changes may actually jolt British people into thinking more carefully about their financial health — and that’s a key opportunity for advisers.
By giving people more clarity over their own finances, these legislative changes offer an opportunity for advisers to ‘stitch together’ information and offer customers an overview, Andrews says.
This creates an opportunity for savvy advisers to show people what their money is really doing — and what it could be doing, in the right hands.
‘Once people have got their heads around it, what we’ll see in the years ahead is more information stitched together and put into one place,’ Andrews says. ‘People will consume all the data and put it in one report, one document to their customer. That’s a journey which people will take.’
With advisers increasingly equipped with hi-tech tools such as cashflow modelling software, it’s a perfect opportunity to deliver clear, efficient advice.
It’s a golden opportunity to help consumers be more choosy about their financial products — showing how habits, and products, will affect their finances.
Andrews says, ‘That ability to bring all of someone’s banking data into one place will be a massive education for consumers. For advisors, it means that all that data can be brought into one piece of software, for instance. It creates massive opportunities.
‘It will enable people to bring all their financial affairs in one place. It will enable people to take more control of their financial well-being.’