The low quality, analogue nature of client data inside many advice businesses would probably save them from total disaster in the event of a security breach. It is definitely saving them from practice efficiencies, increased productivity and the ability to mine data to better understand and serve their clients.
But at some stage, no matter how deep some bury their head in the sand, every business will need to clean up and digitise their data.
The catalyst could be moving platforms and transitioning clients across. It could be an M&A opportunity. (One of the first questions a potential buyer or capital partner will ask is, can I get a client list?)
Whatever the reason, there is much to gain from digitisation including improved information security. Other benefits include faster access to information, ease of updating client records, higher portability and a better client experience.
When it comes time to sell, digitalised businesses also attract higher prices.
My previous article, focused on the ethical and moral obligation businesses have to safely record, store and, ultimately, destroy, data. It looked at the risk and consequences of poor data security.
This article focuses on the types of data advisers should be collecting (everything) and key considerations.
Firstly, the task of safely collecting, storing and using client information involves determining which data to gather.
Taking a step back, it involves deciding which questions to ask. The number and quality of questions will determine the effectiveness, suitability and appropriateness of diagnosis and advice.
The more information an adviser can gather, the stronger their ability to identify a client’s current needs and anticipate their future needs.
In addition to questions, professionals also need to record observations about clients such as their body language.
These observations complement the responses to questions and provide a more complete picture of a person.
Advisers who provide strategic advice commonly use an off-the-shelf fact find questionnaire as part of the discovery process.
Some fact finds are more effective than others at garnering information, facilitating discussions and getting people to articulate their goals. This is not only because of how questions are framed but also their format.
For example, fillable PDF and survey-style fact finds usually require data to be re-entered into other systems. This double handling of information increases the risk of errors.
While significantly better than paper-based forms, they are still static and do not meet the needs of modern advisory firms for information to be current and available instantly.
An increasing number of practices are using digital fact finds which enable clients and advisers to autonomously update information, skip and return to questions, and edit responses. With digital fact finds, data feeds can also be easily arranged with other technology platforms.
Some digital solutions feature a secure vault for information like documents and emails to be stored.
Life is complex, data is complex
Throughout the advice process, advisers are collecting, storing and continuously updating a significant amount of personal client data including assets and liabilities, income and expenditure, financial statements, tax returns, superannuation account information and life insurance policies.
The increasing complexities of life mean there is no such thing as a straight forward question anymore.
For example, today’s modern family often covers divorce, blended families, de facto relationships and same-sex marriages. Each of these scenarios has consequences for estate planning, superannuation and life insurance beneficiaries.
Employment is also not simply full-time, part-time or casual. Many people participate in the gig economy and have side hustles.
Furthermore, people rarely stay in the same job for their entire career, creating a need for advisers to know if a client plans to change employers, occupation or employment status. All this has tax, Centrelink, insurance and retirement planning consequences.
One area that is particularly difficult to get a handle on is the various entities that clients can be associated with. This involves gathering trustee details, beneficiaries, shareholdings, tax file numbers and Australian business numbers.
Clients often need to be chased repeatedly to provide this information and when it is supplied, it is often emailed in dribs and drabs.
All this highlights the importance of having an efficient system for gathering, storing, updating and retrieving data. Effective processes and technology are critical for transforming a business’ operations and minimising the risk of a cyber-attack.
Data security is serious business and every business should be taking it seriously but advisers cannot be expected to be cyber security experts. Advice businesses need a structured, robust process for choosing service providers to ensure that client data is adequate protected and, in doing so, their businesses are also protected.