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Get ready for electronic reporting

In my last column, I focused on the achievements we have seen in industry e-commerce over the last year and looked forward to some of the benefits it would be reasonable to expect to arrive during 2004.

If the business efficiencies achievable as a result of many of the new services are not sufficient to encourage advisers to put technology high on their priority list for 2004, may I suggest another reason – the onset of electronic regulatory reporting as currently proposed under consultation paper 198.

The FSA clearly has a mammoth agenda to complete in the next 18 months. It must bring into its regulatory remit two further market activities, mortgages and general insurance, as well as introduce a depolarised distribution regime for investment business.

There have been many times in the past when I have vehemently disagreed with various FSA proposals. On this occasion, however, against a background of substantial change, I believe it is not only appropriate but desirable that the regulator should start gathering the information it needs from advisers more efficiently.

I am surprised that certain life offices have suggested that the proposals for electronic reporting could cause chaos for those who are not prepared. For those who insist on maintaining manual records, all the FSA will be asking is that they submit the necessary data via a web browser.

Even people without a computer can submit their information via an internet cafe. Alternatively, they will no doubt have an accountant who could submit the information for them.

Electronic reporting is not a barrier but an opportunity, delivering yet another reason why technology should be at the heart of every professional practice.

Just before Christmas, FSA head of submissions programme David Anderson gave a detailed briefing on the plans for electronic reporting to senior operations staff from leading IFAs who attend an adviser forum.

One of the most important parts of the process is that the FSA will create a complete regulatory taxonomy of all the different information that it monitors within authorised firms.

The FSA has opted to use the XBRL standards now being widely adopted across Government departments and around the world. It has opted for XBRL rather than XML, which is widely adopted elsewhere, as it will give both content and context within messages. In the words of Anderson: “If we adopted XML now, in three years time the industry would never forgive us.”

During this exercise, the FSA will review all the information it requests and the purpose for which it is used. As a direct result, the FSA may ultimately ask for less information than it currently requests. At the very least, the amount of duplication that inevitably arises from a series of paper forms can be eradicated.

Regardless of electronic reporting, with more activities coming under the regulatory remit of the FSA, there must be a compelling case for firms to keep all their information electronically so that dealing with regulatory submissions is simply a case of running a series of reports.

That said, the current structure of the software market does not easily lend itself to such a capability. Systems to support these different activities have been developed largely in isolation from each other, with at best subsidiary modules for other areas providing only limited functionality.

In the next few months, it will be essential that software providers create systems capable of recognising that advisers will be carrying on multiple regulated activities and enabling those advisers to deliver a single electronic return covering all such activities. Given the time constraints, this is more likely to be achieved by a series of strategic alliances rather than building new systems from scratch.

The FSA has given clear advance notice of its requirements. Advisers do not actually need to start gathering their data for electronic submission until the first quarter of 2005. However, it will take time to install and train staff on their use so it would be prudent at this stage for advisers to beginning developing a strategy for electronic reporting.

The move to electronic reporting does throw up an interesting side issue, which I believe those of us involved with shaping the future of industry technology need to consider carefully.

Historically, all the different areas of activity have established their own technology standards via different organisations. Currently in the UK alone, we have Fix and others in the managed funds market, the Mortgage Trading Exchange in the mortgage industry, Origo for life and pensions and Polaris in the general insurance market.

This makes me question if it is not time to look at how the various different standards can interact. Surely it cannot be practical to have a wide range of different standards covering the distribution of personal finance products by high-street firms regulated by the FSA?

Is it time to consider rationalising the number of standards in use? If an adviser is sending a mortgage application electronically, various information including name, address, occupation and a range of other data will need to be submitted to the lender using one set of standards. To submit the supporting life proposal, a completely different set of standards will be have to be used. This hardly strikes me as efficient from the point of simplifying system design and minimising adviser training.

At the very least, should those responsible for standards consider a hierarchy in this area? With the Government and the FSA now increasingly requiring the use of certain XBRL standards for submission of data, is there not an efficiency to be achieved if the various different standards bodies agree to default to the Government or FSA standard where it exists? This might reduce significantly the burden of having to cope with multiple standards across different areas of the market.

If we want to encourage maximum use of technology by advisers to increase everyone&#39s efficiency, is it not appropriate that we make the process as simple as possible for them to adopt?

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