Data challenge laid bare for licensees and advisers

Last year, HUB24 worked with several forward-thinking advice collectives to get their input on using data to solve advice challenges.

Participants said this was an opportunity to have a structured conversation with an open agenda. There were no pre-determined views other than a common understanding there has got to be a better way, a smarter way, a more effective way of being in the business of running a licensee, and off the back of that, to push the profession forward.

It was clear that a considerable amount of cost and effort goes into:

• Monitoring advice,
• Governance,
• Risk and compliance,
• Reporting of Key Risk Indicators (KRIs) and
• Auditing.

This makes it difficult for licensees to have enough time and resources to dedicate to services to help practices grow and become efficient and profitable, while delivering great client outcomes.

According to Fortnum Private Wealth Managing Director Neil Younger, to do advice comprehensively is a considerable effort for advisers and right through the whole process – the discovery, the analysis, the research, the SoA or document production, the file note keeping, etc. – is quite onerous.

While this can be many days work, Younger said it makes sense when a client has complex circumstances and has the capacity to pay an adviser to address these complexities. But as he said, advisers also deal with a lot of clients where things are not as complex and yet the same structure and processes need to be applied to many of those simpler circumstances as well, and that makes no sense.

Lifestyle Financial Services has spent the past 12 months working on establishing a foundation SOA with their new licensee. CEO Gareth Hall said the business has spent countless hours making client files compliant. He said licensees vary in their understanding and expectations around compliance, so many practices are having to adapt to new systems as they change licensees. Further, while asking clients to scan and print documents might be the way forward, this is challenging for clients who do not have the right equipment.

The licensees HUB24 consulted with agreed the best way forward was to create consistent compliance solutions so practices do not have to compete on these core services. They agreed collaboration provides the greatest chance of solving the most fundamental issues. This is particularly the case for boutique licensees who, due to their size, may not have access to the full suite of possible solutions but can see the benefits in being able to partner and collaborate with others across the industry.

The greatest challenge is access to quality data.

It is estimated that 80% of the data produced in a practice is unstructured and held in a variety of data sources. It exists in documents such as PDFs and Word documents. This data is therefore extremely difficult to access and assess against compliance obligations.

Neil Younger said data is captured in a number of different ways and as a licensee, you deal with individual practices: the advisers are not employees–they run their own businesses. Capturing that data in a standard way is therefore a massive challenge.

Further, finding ways to deal with unstructured data was critical. Younger notes if he was running a salaried business model where everyone did the same thing because they were employees and can be told that is the the way to do it, there is not the same the problem as when you are dealing with lots of businesses.

Therefore, a major challenge to supporting the provision of compliant financial advice is the digitisation of advice practices.

A solution is required that can take data inputs from a number of sources and bring it all together in a meaningful way that makes it easy for licensees and advisers to proactively manage compliance obligations.

XY Adviser’s Chief Technology Officer Adrian Patty said there is definitely a need to bring more digitisation and structure to advice data sets. While technology can do a lot, there is a lack of useable data so any rationalisation of data and conversion of unstructured data to make it more useable would be a great value add.

HUB24 established the Innovation Lab to investigate how technology available across the market could be leveraged to solve challenges in advice enablement.

The Innovation Lab team asked itself the questions an advice practice would when considering compliance and how to streamline and digitise its obligations – how do we take a variety of electronic documents, determine what they are, read them and pull out the core bits that are important to our business and the regulator?

Fortnum Private Wealth has been piloting the HUBconnect licensee and compliance solution to assist them in capturing, organising, and using their own data. They have connected Xplan and other systems and are cleansing and organising the data to automate KRI reporting currently done manually. This solution uses machine learning to collate all the files uploaded into Xplan and can currently recognise and categorise 1500 files per night.

In such solutions, data is the game, technology is the enabler, and the goal is a much better user case for clients and ultimately for advisers, practices, and licensees.

According to Hall, it makes sense that a platform such as HUB24 which has access to data could also use it to create efficiency for advisers. He said by way of example if you had the data, why wouldn’t you populate the from for a client? This small action would save ten minutes every time, but if that is being done ten times a week, that creates a massive time saving.

This article is an extract from HUB24’s whitepaper titled ‘HUB24: The future of platforms and data in facilitating advice’ and can be accessed here.