We are used to reading about information being obtained under the Freedom of Information Act.
The industry may be less aware that the Government has been quietly working to impose a similar structure to give consumers access to extensive personal data from a wide range of businesses, including financial services providers.
Originally a voluntary exercise as part of the Government’s midata initiative, this was backed up with legislation in the Enterprise and Regulatory Reform Act 2013 to provide powers to compel certain businesses to ensure that: “Data that is released to customers will be in reusable, machine-readable form in an open standard format.”
Although the legislation has to date targeted only energy suppliers and providers of mobile phones, current accounts and credit cards, the Government now has powers to introduce codes of conduct for other industries, requiring them to disclose extensive consumer data. Given the DWP’s interest in giving consumers greater access to information on their pension savings, it is not difficult to see these powers being extended to cover life assurance, pensions and investment management groups.
Probably the most high-profile example of midata in action is the recently launched current account switch service. In a politician’s mind, there is probably not much difference between a service which enables people to switch banks easily and a similar arrangement for changing pension providers.
Advisers will be quick to point out that switching pension provider should be a far more considered transaction than moving bank accounts. However, the midata initiative could represent an opportunity to remove many of the most time-consuming elements of giving pension advice, such as getting accurate information from the current provider.
An interesting development in the midata scheme is a proposal to compel utility companies to provide all the relevant data for a consumer to assess switching energy supplier in the form of a QR code included on paper documents sent to customers. This would enable smartphone users to simply scan in the data to populate comparison services. Why not add a similar capability to annual pension statements?
If the Government requires financial services providers to make the information that consumers need more accessible, this should provide a major opportunity for advisers. But they will need a cost-effective way to obtain the data needed to give correct advice.
Information provided by legacy pension providers is notoriously inconsistent. If there is the prospect of the Government extending midata to the investment sector, advisers must make clear the full range of information needed.
Historically, obtaining such detail has been a painful process but the Government now has the powers to make long-term savings and investment firms provide all relevant information to savers in an electronic format, which they in turn can easily pass to their advisers.
A potential extension of the Enterprise and Regulatory Reform Act to include long-term saving suppliers represents a huge opportunity to greatly reduce the cost of providing advice. In so doing, however, we must make clear to the Government the need to extend the detail required by advisers to give advice in a fully compliant way.
The midata initiative could not only catalyse pension switching but also speed up progress on platform-to-platform re-registration. Many fund management groups have been poor at putting in place services to facilitate electronic delivery of information to consumers. They should address this before it becomes a legal requirement.
The Government has not yet announced an extension of the midata project to cover savings and investment products but the logic of doing so is clear. I would be pleased to hear from any advice firms interested in collaborating to create the necessary information to share with ministers.
Ian McKenna is director of the Finance & Technology Research Centre