PIMFA Journal - October 2019

The Personal Investment Management & Financial Advice Association

JOURNAL AUTUMN 2019

IN THIS ISSUE...

Shall we get engaged?

A closer look at consultation paper Should all investors be treated equally in the access to information from UK listed companies?

What could an apprentice do for your firm?

Keeping the trillions of family wealth: how to win nextgeneration clients The Rise of Cryptocurrencies and the Question of Regulation Pricing in Wealth Management

Better Client Outcomes?

Offset the impact of inflation by using a cash management service Cyber Doctor PIMFA PLUS Hacker Girl Between a rock and a hard place: how firms can handle diversity reporting and GDPR Digital Innovation in Wealth Management

Contents

08 A closer look at consultation paper

04

06

CP19/25

Shall we get engaged?

Royal London

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--Octo Members Group

The Personal Investment Manageme

PIMFA PLUS --PIMFA

10 Should all investors be treated equally in the access to information from UK listed

14

companies?

Pricing in Wealth

--Investor Meet Company

Management --Alpha FMC

18 Better Client Outcomes?

--Elephants don’t forget

20 Offset the impact of inflation by using a cash management service --Insignis Cash

The Personal Investment Management & Financial Advice Association

22

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22 Cyber Doctor

24

---

What could an

Mitigo

apprentice do for

26

your firm?

---

Keeping the trillions

NMBA

ent & Financial Advice Association

of family wealth: how to win nextgeneration clients --Orbium

42 Digital Innovation in Wealth Management

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--Objectway Ltd

Between a rock and a hard place: how firms can handle diversity

30 The Rise of Cryptocurrencies and the Question of

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reporting and GDPR

Hacker Girl

MirrorWeb

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--TRMG

Regulation ---

AUTUMN 2019

Dene Place Curation Capital

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PIMFA Director of Strategic Partnerships Richard Adler takes a look at our PIMFA PLUS offering It’s been a year or so now since we first introduced PIMFA PLUS as a brand.

We wanted to offer members white-labelled, state of the art products at competitive prices (in most cases cheaper than going direct to the provider themselves). We have also rejected a lot of companies’ products along the way as we strive to provide best-in-class offerings to members.

PIMFA also receives a small intro offering every time a member purchases a PIMFA PLUS product, thus enabling us to continue with the work that members demand of us. Long gone are the days when trade associations could solely rely on membership and sponsorship income alone. We are a not for profit organisation but very much also not for loss!!

PIMFA, where applicable, avail themselves of all of the PIMFA PLUS products on offer so as to demonstrate to members that the products are fit for purpose. However, we always stress the point of conducting due diligence when making any purchase decision.

Our first PIMFA PLUS product was a Financial Crime Intelligence Sharing Platform (AECIS) with our partner FCI Limited. Our member firm Killik & Co were the first to take up the service. Here’s what they had to say about the service;

“We believe that AECIS is an essential component of the fraud investigator’s toolkit. Intuitive and very straightforward to use, AECIS fills a strategic gap in the fight against financial crime”

Beyond Encryption quickly followed as product number two.

“Essentially a real mail encryption solution, founder Paul Holland actually put this together many years ago but it was ahead of its time and only came to the fore again after GDPR and they haven’t looked back since.”

Insignis Cash Solutions then became launch number three as an active cash management solution for cash deposits. They have already successfully worked with several of our member firms as the solution continues to gain traction.

“Insignis Cash Solutions... have already successfully worked with several of our member firms as the solution continues to gain traction.”

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Investor Meet Company joined as partner number 4 .They will officially launch at our Annual Summit in October. Here’s a snippet of their offering;

“Our platform, which is free for Wealth Managers and Individual Investors, can connect any Individual Investor to any UK Listed company for direct, live interactive presentations around company announcements without the need to travel.

Individual Investors can now access company management on the same basis and at the same time as Institutional Shareholders do. We believe that all investors should be treated fairly, equally and on a nondiscriminatory basis, so they can make an informed decision.”

For further information on any of the offerings please follow this link: www.pimfa.co.uk/become-a-member/ pimfa-plus/ Or contact Richard directly: Richard Adler, Director of Strategic Partnerships, PIMFA richarda@pimfa.co.uk 020 7011 9863 07936 369 982

This offering has certainly been well received in the PIMFA member community with any costs borne by the UK Listed company itself.

We also have several new PIMFA PLUS partnerships in the pipeline including SM&CR software, customer service surveys, website archiving and customer journey, digital identity software, cyber analysis, legal costs management and education and training using AI.

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Shall we get engaged?

It is just becoming incredibly difficult to get our message heard. The financial services sector has most certainly seized upon the Bill Gates mantra that ‘content is king’; we are all now producing it, filming it, recording, writing it and pushing it out in every direction. The problem comes that the noise created by all this can just seem deafening.

Speaking as the former owner of a wealth management firm; as someone who has always been incredibly interested in all things financial planning, investment and regulation, and despite my thirst for knowledge, I recognise it can become so difficult to keep up with the constant flow. Think how our clients feel about it all.

Client portals and apps, such as Octo Members, are a good start. They can incorporate responsive and interactive graphics, such as those served up to clients by at least one of the fund platforms, and those built by video game designers are a step further. Supporting the adviser or wealth manager with chatbots and AI is already being tested by progressive firms.

Allowing clients to consume the ‘thought leadership’ produced by our firms in their own way by reading, hearing it or watching will almost definitely soon become a baseline benchmark for firms. Further to this, allowing those same clients to immediately ask questions of it, in real time, is bound to come next. Some firms are doing so already, and not Despite GDPR, and the various options to just for their online offerings. Wealth management unsubscribe, it just keeps coming. To make it must become a lot more engaging rather than worse, when searching for interesting material and fiddling with online flipbooks and, even worse, static actionable content, you appear on more and more brochureware. Deploying interactive widgets within radars and receive more and more of it. websites, portals or digital newsletters could bring much greater engagement and retention. Whilst Therefore, I am a firm believer of interactive there is still much to do in our sector to make APIs content - informative, engaging material which actually work and talk to each other it is possible informs, educates and stands out from the to embed informative and thought-provoking average. This content allows questions to be interactivity. Fee calculators, benchmarking, live asked of it in real time, which is served in the way chat, portfolio deep diving; the list is ever growing. the consumer wants it.

Tools that help clients confront their fears, concerns and goals and help them explore what is possible Our clients are living in the gig economy; they ahead of meetings with their wealth managers can research, purchase, review, rate and return should make for a more engaged and informed a host of services all on their phone and within client and lead to more satisfactory meetings. seconds. They can make referrals, and they can immediately express displeasure or joy with a Even turning to the more basic elements of product or service. This is not a trend that is ever information dissemination and understanding when going away. Faster 5G and ever smarter phones and how our busy clients want to hear from us is and tablets will just amplify this phenomenon. a great start. Just letting our clients listen to what Financial services, whilst admittedly infinitely we have to say may bring real benefits. According more complex than reviewing a meal or buying to the latest research from Ofcom the number of an actual product online, will have to think hard people listening to podcasts on a weekly basis has about becoming more accessible, engaging and soared to almost six million which is double the immediately responsive. I suspect the days of number just five years ago. A relatively inexpensive static portfolio valuations and fund fact sheets are way to deliver information on a regular basis and in fast becoming numbered. a way that many wish to consume it.

A recent Stanford University study found that 90% of the 4,000 participants said information delivery was their favoured content consumption was in a digital format. Ten years on, despite everything – e.g. spam, new communication channels – email remains the backbone of all digital communications and new forms of digital delivery made possible by faster operating systems and ever smarter phones is enhancing email marketing.

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The main reasons cited were that it allowed content to be timely, more client specific and therefore more relevant. Different sets of clients could receive different sets of information more aligned to their needs and requirements.

Of course, there’s compliance, brand consistency, reporting and a host of other issues.

However, when allied to highly developed financial planning and investment expertise, firms which approach communication with care and a desire for innovation are bound to stand out and attract and retain clients in our highly competitive marketplace.

It is only right that firms harness their huge internal expertise and knowledge and deliver it to their clients in the way they want to receive it. Just Beyond this though, real innovators are already how many printed newsletters go straight in the exploring mobile only content strategies. Consumer bin, particularly in a busy post week in the homes facing brands such as Motley Fool have already of the investor, I wonder. adopted a mobile first investment knowledge approach and we should be watching these types This is not to say that the content produced is of firms closely. Real time reporting, immersive bad; I just feel it could very often be delivered investment and portfolio tools, scenario modeling in a more interesting, not to say cost-effective, tools and smartly delivered on-demand videos manner to those who pay our fees. embedded in digitally engaging client financial and Food for thought, I hope. life stage digital experiences.

Lee Robertson, Chartered FCSI, Real time on demand reporting across an CEO, Octo Members Group investor’s whole portfolio, the ability to research www.octomembers.com and engage with those involved in the financial planning, administration and investment elements of the process, real and powerful client relationship and engagement. All are now very possible with the technology of today. There are firms delivering these types of products to our sector already and there are bound to be more coming along. We all know that the pace of technology is ever-quickening.

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A closer look at consultation paper CP19/25

On 30 July 2019, the FCA released consultation paper (CP19/25) on the subject of pension transfers. The aim of the paper is to consult on a number of proposed changes to achieve the following objectives: • Reduce the scope for conflict of interest by banning contingent charging.

• Reduce the scope for conflict of interest by limiting firms’ ability to recommend transfers that incur unnecessarily high ongoing adviser and product charges.

• Improve charge disclosure and implement checks on customer understanding.

• Increase continuous professional development requirements for pension transfer specialists (PTS).

• Improve data collection from firms.

• Amend technical areas of the rules and guidance to clarify and extend existing requirements.

The tone of this consultation paper (CP) is very different to previous policy statements (PS) and CP’s. It’s more direct, more prescriptive and more decisive than we’ve come to expect from the FCA. It’ll be interesting to see if this stern tone and tough stance makes it all the way to the PS. The consultation period closes on 30 October 2019 with the resultant PS expected in Q1 2020.

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Justin Corliss, Senior Business Development Manager at Royal London, reports on the proposed changes in the FCA’s recent consultation paper about pension transfers and contingent charging.

The FCA’s concerned that too many advisers are delivering poor advice, much of it driven by conflicts of interest in the way they’re remunerated. The primary concerns around contingent charging (CC), where the adviser’s only remunerated if the transfer goes ahead. Most people receiving advice on pension transfers are currently advised on a contingent basis.

Data the FCA has collected since pension freedoms began in April 2015 suggests 69% of customers seeking advice on pension transfers were advised to transfer, although this falls to 55% once known triage clients are factored in.

This isn’t skewed by a few advisers. Recent findings showed 60% of firms holding these permissions recommended over 75% of inquiring customers to transfer.

In recent thematic reviews by the FCA, only around 50% of advice was deemed suitable.

In recent years, the FCA has repeatedly reiterated its stance that a transfer won’t be in the best interest of most people. This if nothing else suggests the FCA expect the ratio of transfer to inquiry should be less than 50%.

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The impact of ongoing adviser charging on the initial advice decision and the impact this has on the customer’s retirement savings are given much closer inspection than we’ve seen in the past.

As it’s still at consultation stage, it’s difficult to accurately predict the impact this CP will have on customers seeking advice on pension transfers going forward, but possible outcomes include: • PI insurance being more difficult and sometimes impossible to secure for pension transfer work, and firms withdrawing from this market as a result.

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• Firms withdrawing from the transfer market as they feel the increased risk of this type of business outweighs the benefit. The FCA acknowledges these concerns in the CP, but feel they’re an acceptable price for what they believe will provide increased consumer protection.

• Both these factors have the potential to reduce the supply of advice, meaning customers may find it more difficult to find an adviser and waiting times may be longer. This is a significant problem as the cash equivalent transfer value (CETV) is only guaranteed for 3 months.

Obtaining a new CETV comes at a cost to the customer, and the new transfer value offered may be higher or lower than the previous one.

• Contingent charging has its issues, and will probably be banned in the resulting policy statement, but it does enable customers to pay for advice from tax relieved pension savings, meaning a £100 charge has effectively cost the customer £80 and possibly less. While not technically impossible on a non-contingent basis, it’s impractical and unlikely to be used.

This could increase the cost of initial advice for customers.

• However the FCA’s comments suggesting transfer advice could be provided for around £3,500 may see initial charges gravitate near to this figure. The FCA’s findings suggest the average initial charge on a contingent basis is £7,000 - £10,500, so initial charges may fall.

• The FCA’s proposed abridged advice may see customers being advised a transfer is not suitable without incurring the cost of the full advice process. This could reduce costs a customer would otherwise have incurred.

You can find more details on this consultation paper and the seven proposed objectives by visiting our website at adviser.royallondon.com/pensions.

Alternatively you can get in touch with your usual Royal London contact.

Justin Corliss, Senior Business Development Manager at Royal London www.royallondon.com

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Should all investors be treated equally in the access to information from UK listed companies? We believe they should, the fact is they are not.

84% of the UK Listed Companies we surveyed from the largest to the smallest reported in their Corporate Governance Statements that they treat Individual Investors differently to Institutions.

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However, with 92% of over 300 UK Institutions stating that meeting a company was important or critical to their investment decision, why isn’t it the same opportunity available to all Investors so they can benefit too?

The answer is simple. Individual Investors and Wealth Managers are spread across the UK, not just located in financial centers, and as a consequence can be overlooked. Just ask the regulator

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It’s not just what we believe, it’s a regulatory requirement UK listing rules require companies to treat all investors fairly, equally and on a nondiscriminatory basis, as defined by UK Company law (section 172), and by the FCA and ESMA (transparency directive 17 & 21) The regulatory focus on shareholder engagement in the UK and QCA Corporate governance codes, The Stewardship code and the new FCA Shareholder Engagement rules (issued on 10th June 2019 (CP19/7)), reinforce the importance of engagement for all investors.

Smaller investors can be overlooked when board focus is primarily on major shareholders. Boards may want to consider additional ways to engage with smaller shareholders, such as webinars.”

Financial Reporting Council, UK Corporate Governance Code

We believe that “All investors should be treated fairly equally and on a nondiscriminatory basis.”

Investor Meet Company is a digital platform providing Individual Investors and wealth managers, direct access to UK Listed companies including Investment Trusts around announcements, making them part of the Investor roadshow. We provide Live, interactive management presentations, for all investors regardless of the number of shares they own or where they are located, so they can make a more informed decision.

Direct integration into wealth management platforms at zero cost.

Through integration we bring Individual Investors and Wealth managers closer to companies than ever before. Now everyone can access management team presentations without the need to travel and have the opportunity to directly ask questions to get the clarity they need for a more informed investment decision.

We are now integrating our technology into a growing number of Wealth Managers and Online platforms to offer their clients and regional investment managers access to UK Listed companies for a more intuitive experience.

“We place great importance on communication with investors and we see investor engagement with issuers as an integral part of the wider investment process. Through integration with Investor Meet Company we aim to provide our clients and investment managers the opportunity to engage and communicate with the management of investee companies directly, providing a shareholder engagement solution that we believe will be greatly valued.”

Marcus Tree, Director of Development, Charles Stanley Direct

We believe that all wealth management firms regardless of size should have the same opportunity to access UK listed companies.

We have made integration simple and secure, so it can be available for all firms, from one investment manager to a team of one hundred. twitter: @PIMFA_UK

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“Good corporate governance is delivered by a board that communicates openly and effectively with all shareholders.

Information provided should be easily understood and be presented in an accessible format.

Regular, direct and interactive engagement, particularly with private investors, will help to enhance the transparency and integrity of the market as a whole.

Investor Meet Company offers a conduit for companies and investors to connect directly.”

Tim Ward,Chief Executive The Quoted Company Alliance

“Effective engagement is critical for maintaining and growing confidence, particularly in smaller companies.

Investor Meets Company provides an innovative solution for smaller investors to gain access to a company’s management and allows companies to fulfil their governance requirement to treat all shareholders equally.”

Nick Hawthorn Investment Manager, Downing

“We never invest in any company where we have not met the management team as this represents a key component of our due diligence. In the interests of fairness and good governance it is desirable for this opportunity to interact directly with plc management teams to be extended to individual investors as well as institutions.

We therefore encourage all companies to access individual investors through live interactive engagement making them part of the institutional roadshow.”

Ken Wotton Managing Director, Quoted Investments, Gresham House Asset Management

“We build conviction in our client portfolios through hearing from numerous quoted smallcaps. Thereafter it’s important that market liquidity in these stocks is the best it can be. We believe that giving a wider range of market participants the opportunity to have live interactive engagement with smallcaps will not only help them make more informed decisions, but also enhance market liquidity as well. In our view it is a win-win situation.”

Gervais Williams Senior Executive Director Miton

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84% of the UK Listed Companies we surveyed from the largest to the smallest reported in their Corporate Governance Statements that they treat Individual Investors differently to Institutions.

Should all investors be treated equally in the access to information from UK listed companies? We believe they should, the fact is they are not.

• Integrated Solution – simple integration available to all wealth management firms, an enhanced user experience, efficient access to UK listed companies.

Source: Investor Meet Company

• Zero cost and simple to use - A central platform, enabling Individual Investors and wealth managers to become part of any investor roadshow.

• Fair – connects any Individual Investor directly to any UK listed company without the need to travel.

• Equal - The same live management presentation at the same time, building trust and confidence through continued engagement

92% of over 300 UK Institutions stating that meeting a company was important or critical to their investment decision.

Source: IR Society

77% of over 6000 Individual Investors said that companies could do more to engage with them and do so using technology.

• Non Discriminatory - direct interactive access, regardless of the number of shares they own or where they live.

• Just the Facts - Investment decisions based on Information directly from the company • Central Platform - Live and On-demand access 24/7 to presentations and information from one central platform.

Marc Downes, CEO, Investor Meet Company www.investormeetcompany.com

Source: Equiniti Survey

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n i g n i h t c n i The pace of change in Pr ealt eme Wealth Management is g continuing to accelerate. Following W na a raft of regulatory initiatives Wealth a M Managers are now increasing their focus

on customer growth and the exploration of operational efficiencies. Intrinsically linked with these themes is the subject of pricing. This is an area that is naturally attracting greater attention as Wealth Managers look to improve their competitive positioning, and as customers demand new ways of engaging with their Wealth Manager, on their terms and with full transparency.

Historically, the overall cost of Wealth Management services has been opaque. Regardless of the customer segment, and the type of Wealth Management service provided, it has been challenging to determine the true cost of engaging the services of a Wealth Manager. The challenges are well documented, including a complex supply chain of products and services, a lack of client transparency, difficulties in being able to compare services and organisations not having the data required to calculate the overall cost of investing.

These challenges have resulted in a stagnant approach to pricing, with most Wealth Managers not adjusting their pricing strategy for several years. Recent developments, including greater regulatory scrutiny and a more informed customer, are starting to drive fee and margin pressures across the industry. Wealth Management services have managed to retain their proportional cut of the investing pie, with the cost of investment solutions, product wrappers and platforms declining, and the cost of Wealth Management services (including Financial Planning) remaining relatively stable.

Following the introduction of Ex-post MiFID II costs and charges disclosures, there is now a greater degree of transparency with clients beginning to have a clearer picture on who they are paying in the value chain. Despite greater transparency, undertaking pricing comparisons remains challenging. Given the complex menu of services available to clients, conducting comparisons and value assessments is an increasingly difficult exercise, not just for clients but also Wealth Managers.

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Pricing strategy firmly on the agenda As a result, Wealth Managers are looking to review their pricing to ensure they remain competitive whilst providing value to their clients. For the reasons outlined above this is not an easy exercise, and Wealth Managers can’t just compare the headline tariff. There are a range of areas to consider when assessing the overall ‘pricing’ of a Wealth Management service. Here are some insights from our experience in this area: Comparing like for like - what are the constituent parts of the client’s portfolio?

• Some managers rely heavily on the use of external collective investments within their private client discretionary portfolios, yet don’t necessarily pass this saving onto the client, applying high discretionary service fees on top of external fund manager fees.

• This gets even more complicated when wealth managers make use of internally managed funds and in some cases ‘double charge’ the client by applying full fat discretionary service fees on top of internal fund management fees. In doing so, some managers dress this up as a bespoke and personalised service, particularly in the mass affluent space (£100k-£1m).

• Our findings show that the use of collectives is one of the main attributes for determining a higher overall cost to the client across different wealth management propositions.

Put simply, those managers which use predominantly direct holdings in their portfolios, may on paper have a higher discretionary service fee, but when it comes to the overall client cost, they are often lower than their peers.

Pricing innovation - what alternative pricing mechanisms are being employed by Wealth Managers?

• The VAT treatment of a Wealth Management service is often overlooked but can account to roughly 10-15% of the overall cost payable by clients. This becomes complicated depending on how the Wealth Manager applies the VAT to the client’s portfolio and which elements of the pricing tariff attract the VAT. • There are examples across the industry of offsetting the cost of internal funds from the cost of the discretionary service fee in order to reduce the VAT impact to the client. One of the reasons cited by Wealth Managers

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for not supporting such a mechanism is the inability to manage this pricing structure from an operational perspective (a systems and data challenge).

• Likewise, there are instances of firms separating out the cost of custody and administration from their discretionary service fee in order to reduce the VAT. Careful attention would need to be paid by the Wealth Manager on the justification for employing such mechanisms and we would recommend tax advice is sought beforehand.

• There are also some instances of dealing or research costs being separated out from the discretionary service fee, however most Wealth Managers have adopted an ‘allin fee’ approach for the core proposition, with additional fees payable for ancillary services. In the main there is still limited pricing innovation in the private client Wealth Management sector.

Sweet spot pricing - what is the Wealth Manager’s target market?

• The use of tiered pricing structures is standard in Wealth Management and the make-up of these structures are often tailored to help focus on specific client segments.

• The approach to tiered rates can take a number of forms with ‘cliff-edge’ (all the clients assets receive the lowest tier they are entitled to) and ‘blended’ rates (each proportion of a client’s assets is charged the relevant tier) being the most common.

A small number of managers apply capped rates to benefit their most wealthy clients.

• Consideration should also be given to the Wealth Mangers existing book of clients versus the clients they are looking to target in the future. We rarely find these are the same which creates some interesting pricing considerations.

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Pricing execution – is there a discounting culture at the Wealth Manager?

• For private client Wealth Managers, particularly those focusing on the Ultra High Net Worth (‘UHNW’) space, the client doesn’t always pay the headline rate.

• Discounting is common particularly when faced with competitive pitches from peers. Often discounting has limited centralised governance and oversight resulting in a ‘adviser led’ pricing approach. This often leads to poor execution, creating a discounting culture that becomes the norm across the business.

• Some managers have now adopted pricing committees and have strong governance in place to manage any special pricing structures.

Embedding a more formal approach will ensure that value remains at the forefront of any pricing decision, maintaining the right balance between securing the client win and the revenue required to deliver a profitable service.

Although, trust and client service remain important components, industry developments are bringing pricing to the fore. With the industry on the cusp of inter-generational wealth transfer this will remain an important area of focus over the coming years as clients start to review the value of their services in greater detail.

Wealth Managers, looking to review or update their approach to pricing, will need to undertake a comprehensive exercise to understand their current approach to pricing in line with their peers and the wider industry. This analysis is challenging, looking at published pricing tariffs alone will not provide the detail required. Identifying and implementing a revised pricing strategy requires significant input and support from across the business and needs to be carefully managed as part of a robust change programme.

Please contact Alpha if you would like to have a conversation about how we are helping to support change in the Wealth Management industry and to talk about our pricing experience.

Bradley Northrop, Senior Manager, Alpha FMC www.alphafmc.com Bradley has undertaken a number of pricing exercises in the industry supporting Wealth Managers and Financial Planners with customer growth and strategic initiatives.

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Wealth Managers, looking to review or update their approach to pricing, will need to undertake a comprehensive exercise to understand their current approach to pricing in line with their peers and the wider industry.

The Personal Investment Management & Financial Advice Association

Clear, Fair & Not Misleading: Financial Promotions, What Your Firm Needs to Know 22nd October 2019 09:00- 16:30

PIMFA Learning

What Does Good Training & Competence Practice Look Like in Your Firm Under SM&CR and MiFID II? 21st November 2019 09:00 – 16:30

Training Courses

Let’s Talk About Product Governance & Prod Rulebook 19th November 2019 09:00 – 16:30

Supporting Customer in Vulnerable Circumstances 9th December 2019 09:00- 16:30

What Does Regulated ‘Good Conduct’ Look Like Under SM&CR? 13th December 2019 09:00 – 16:30

Webinar

SM&CR: The Hidden Challenges for HR 7th November 2019 11:00 – 12:00 Associate Member Briefing & Drinks Reception (Free for Members) 25th November 2019

Financial Crime Conference 4th February 2020

PIMFA Events

Financial Adviser Forum 22nd January 2020 Compliance Conference 16th June 2020

Parliamentary Day 23rd January 2020

Women in Wealth Event Series

Cyber Resilience Conference Diversity Conference

Podcasts

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Better Client Outcomes?

So all the chatter on the industry forums appears to be massively SM&CR centric and pretty much doom and gloom. Frankly, I am not surprised after FCA slipped out an announcement on August 5th when everybody and their dog was on holiday, stating they were dissatisfied with the standard of Conduct Risk training that had been delivered by the banks in wave 1 of SM&CR and to compound matters intended to focus on this specific area for all firms post December 9, 2019.

From what I gather, their beef is that the banks have failed to deliver appropriate training at a rolecentric level and adopted the default, one-size-fitsall approach, assuming it’d been ok in the past so why not now, right? Wrong!

There is a school of thought that suggests that the big banks are so big their professional reputation is largely exempt from the damage of a fine for failure to comply, almost irrespective of the scale of the fine.

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I am pretty certain the smaller wealth management community is far more vulnerable to a fine or even the whiff of any form of noncompliance. Succinctly, no firm in this sector can afford the reputational damage, in some instances, it really could be terminal.

Little wonder then that the wealth management sector appears to be more nervous than the banks that went before them in landing SM&CR and ensuring your clients are genuinely treated fairly, by competent employees, who are fit and proper to execute the work delegated to them by Senior Managers.

Examining the wails of protest from some of the banks, it would indicate that much of the emotion arises from the need to have a control framework that treats every employee as an individual and delivers guaranteed, role-centric competency rather than a sheep dip tick box exercise of days gone by.

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The question the wealth management community should be asking themselves is “how do we gather credible evidence that employees are genuinely fit and proper such that we can repair the inevitable gaps, maintain competence and take remedial action where required?”

Well, thats what the legislation says and banks that argue they are simply too big to do so would appear to have missed the point of “proportionality”.

That doesn’t however absolve the smaller wealth management firms of complying and whilst practically it may be easier to deal with 300 employees rather than 30,000, the fact of the matter remains that implementing a control framework that treats every employee as an individual is on the face of it no laughing matter.

Even when one finds a way of doing so, doubtless at considerable expense, the material point is in fact the evidence that employees are and remain fit and proper. It is this evidence that will enable the wealth management community to adapt and evolve and to create a culture where customers are always, consistently treated fairly and you deliver, demonstrably better client outcomes.

I believe that this evidence gathering is actually the bigger challenge and not “simply” ensuring training is appropriate to the role that an employee performs; in my opinion thats a gimme and failing to do so is in itself a huge statement of a failure to treat this legislation seriously. It would appear the regulator is on the same page!

The question the wealth management community should be asking themselves is “how do we gather credible evidence that employees are genuinely fit and proper such that we can repair the inevitable gaps, maintain competence and take remedial action where required?” Also perhaps, use said evidence to defend the firm and Senior Managers in the event of a breach?

Relying on the legacy approach of annual e-learning is a dangerous strategy and will not provide the evidence that a Senior Manager would twitter: @PIMFA_UK

require to demonstrate they had taken reasonable steps. As a Senior Manager, ask yourself the question, if the L&D e-learning records was your only evidence that you took reasonable steps your team were fit and proper to conduct the said work, how comfortable would you feel in that interview?

I would say this, but an unintelligent, traditional approach isn’t the answer. Artificial Intelligence will become a default solution in the sector and is already being deployed in various forms by a number of the more progressive FinServ firms. It need not cost the earth or indeed shackle the firm to unworkable practices and huge administration, quite the opposite if it is to be successful.

AI is a game changer and most important should provide firms with perfect evidence that they need to direct change in the organisation, pro-actively manage people-based risk and drive a culture of genuine “best for client outcomes” Elephants don’t forget are world leaders in the use of AI to augment how employees learn and retain mission critical knowledge and competence. We trade in more than 40 countries, 14 languages and focus almost exclusively on regulated firms.

Some of the largest and smallest FinServ firms in the world rely on our award-winning AI to drive optimal client outcomes which is why PIMFA has partnered with us.

Adrian Harvey, CEO, Elephants don’t forget www.elephantsdontforget.com Adrian Harvey (51) CEO of Elephants don’t forget is the ex-Managing Director of British Gas and a UK division of the German energy giant, Eon. Prior to this he spent a decade in Senior Manager roles in the FinServ sector.

LinkedIn: @pimfa

www.pimfa.co.uk

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Offset the impact of inflation by using a cash management service

It’s important to make the most of what the market is offering when it comes to savings rates to ensure that cash is as protected from inflation degradation as much as possible. We don’t have any influence over either the savings rates in the market currently or the rate of inflation, and therefore a few key things can be done in order to make the most of the current situation.

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The savings market in the UK is getting battered by a number of economic and political factors. Normally, with the increase in the competition alone that we are currently seeing in the savings market, there would be an increase in the interest rate offering for savers, but with uncertainty we are seeing conservative rates. On top of lower interest rates, we are also seeing the inflation rate increase which does little for the future returns of our cash. Save now, don’t wait until the rates increase

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A lot of clients that we speak to often question the point of savings on a cash management platform as the returns are historically low. We feel that now is the perfect time in which to do so as your incentives to monitor and move cash to other providers is so low, and yet in such a tight market, every percentage point increase helps.

Take for example £100,000 in a high street bank.

Currently in a 1 year account, it would be earning 0.40% (Santander eSaver account) - that’s £400.00 interest in that year.

An important consideration to factor in when thinking about savings is the compounding of your interest and the significant increase this can have.

This will go a long way to mitigate the inflation depression on your savings.

The compound effect on this cash if left in the Santander account (assuming that the rate remains the same) is £401.60 in year two.

The key to getting the most out of compounding, is of course, action. Do something now so that there is interest to compound. There is no point waiting until the rates increase and then save. Rather save now, and use a cash management service to automatically move your money into a better interest-bearing account when the time comes.

On the Insignis Platform currently, £100,000 in two 1- year term accounts will earn £1,902 (1.90% blended yield) in interest a year, significantly more than the current high street example. If a client wishes to compound that, and using the same assumptions above for year 2, then the interest at the end of the following year will be £1,946.

This also includes the FSCS protection eligibility of using two different accounts versus a single account, without the hassle.

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The main reasons cited were that it allowed content to be timely, more client specific and therefore more relevant. Different sets of clients could receive different sets of information more aligned to their needs and requirements.

Of course, you also need to factor inflation into the equation to understand the long term value of the cash, but there is also largely nothing that we can do to alter that on an individual basis. A client would have to tie their cash away for longer than a year in order to benefit from an interest rate that beats the current rate of inflation and, in these uncertain economic times, not surprisingly, there are not a lot of takers for this liquidity.

Use Cash Management platforms to always get the best rate for your needs The continuous management of the deposit and constant review of the bank interest rates to ensure that the cash is always making the most of the better banking rates available is vital.

Looking after and moving each tranche of cash to other accounts, according to your requirements, is a time-consuming endeavour, one that a cash savings platform can take care of for you.

Decrease the degradation of your savings due to the impact of inflation as much as you can and make the most of the saving account interest rates that are currently on offer.

Giles Hutson, CEO, Insignis Cash Solutions, www.insigniscash.com

LinkedIn: @pimfa

www.pimfa.co.uk

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Cyber Doctor Powered by

Q: As a small IFA will I really be a target for cyber criminals? Why would they possibly want to focus on me?

poorly trained staff. If you have those flaws, you will be hit and may become a target for more focused attacks.

A: Most cyberattacks are not specifically targeting your company, they are high-volume indiscriminate attacks that hit every business connected to the internet.

They are seeking out known weaknesses in the business technology, applications and

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The important thing is to ensure you are set up to be resilient against these indiscriminate attacks.

Precautions include giving your IT systems a health check, getting some effective cyber staff training and making sure that your antivirus is working and properly configured.

To find out more just follow or visit us

To get your question featured in the next edition of Cyber Doctor email your questions to cyberdoctor@ mitigogroup.com.

It is dangerous to hope that you don’t get hit. Please take some precautions.

Q: I have an IT company that look after my computers and systems. Am I right to assume they are covering cybersecurity?

A: I am afraid this can be a dangerous assumption, for a couple of reasons. Firstly, the effectiveness of the attacks has grown significantly as cybercriminals become increasingly sophisticated.

Secondly, the growth in cloudbased software, mobile phone usage and remote working has dramatically increased the attack ‘surface’ available to cyber fraudsters. This means cybersecurity is now a specialism and not ‘general practice’.

My advice here would be to sit down with your IT support function and get them to show you exactly what they are doing to protect your business against cyber security risks. In most cases, IT support firms rarely provide proper staff training or a governance framework that is appropriate for FCA regulated businesses. There will be areas within your business where you need more specialist cyber advice viewed through the eyes of a cyber security professional.

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Q: My insurance broker has suggested I investigate getting specialist cyber security cover for my business. What are your views on this?

Q: My IT company performs regular system back-ups which comforts me when I hear about Ransomware attacks; however, I’ve heard from a friend who has paid a ransom when their back-ups didn’t work? How can this happen?

A: My experience with cyber insurance cover is that you either end up with something that is cheap and inadequate or good cover that is expensive. I liken the analogy with driving, in that you must receive instruction, pass a road test, MOT your car annually and have insurance.

Insurance does have a place but shouldn’t replace training staff and checking that your technology is working correctly.

A: This is the scary thing about ransomware. Most people believe that their IT back-up system is set up correctly, but it has likely not been tested against a ransomware scenario.

Ransomware attempts to encrypt (lock-up) every file in your business and historic backups can be lost (overwritten) if it has not been set up correctly.

My recommendation would be to go through some simple steps toward a stronger security posture, so you don’t need to rely on insurance. You need to do a risk assessment on your people, processes and technology. Then take remedial actions to ensure they are working effectively together to control cyber risk.

It’s important to understand how your back-ups are set up. The best thing you can do is sit down with your backup provider and get them to talk you through how it would work in a ransomware scenario and get them to prove to you that encryption won’t lock or overwrite all your backed-up copies.

If you wait for an attack to happen the reputational damage is already done and insurance will only make some of the pain go away.

Ransomware is becoming increasingly common. Please don’t wait for an attack to test the resilience of your back-up, rehearse it now!

LinkedIn: @pimfa

Mitigo provides specialist cybersecurity services to the financial services sector, covering technology testing, people training and governance, and ensuring legal and regulatory compliance. All for an affordable monthly fixed fee. www.mitigogroup.com/ pimfa

www.pimfa.co.uk

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In a government survey, 70% of employers said that hiring an apprentice had improved product and service quality, as well as productivity.

What could an apprentice do for your firm?

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It will come as no surprise to most of you that the average age of an adviser now stands at 57, while the average client age has dropped over the past 3 years by 10 years.

These shifts show us that, as the demand for advisers amongst the younger generation is already happening, this demand will need to be met by encouraging more people into the industry.

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At NMBA, we’re committed to improving the access to, and quality of, advice which is why we developed our comprehensive government-backed apprenticeship programme.

But, have you ever considered what an apprentice could do for your firm?

An apprentice is there to fill the skills gap in your firm – whatever that may be.

The benefits of hiring an apprentice There are lots of benefits to hiring an apprentice, with some being more obvious than others. For example, it’s a highly cost-effective training solution, with up to 100% funding available.

Other less tangible benefits might be the boost in energy you get from hiring a new employee or developing someone who already works for you, which in turn leads to increases in productivity.

In a government survey, 70% of employers said that hiring an apprentice had improved product and service quality, as well as productivity.

Having a clear progression path in place can also be linked to more satisfied employees as it shows the company’s commitment to their development and providing a long-term career path which can reduce employee turnover and reoccurring recruiting costs.

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As your apprentice moves through their learning journey and towards being fully qualified, you may start to think about the future of your firm and what that looks like. As a result, you may find you have a clear succession plan in place giving you peace of mind.

What’s more, the more competent your apprentice becomes, the more tasks they can start managing. Tasks that, up until now, may have fallen to other advisers, or you. With increased capacity, there’s a chance to better serve your existing clients, or indeed to look at growing the business.

It’s also worth considering what opportunities could be available to your firm thanks to having someone younger onboard, whether that’s more up to date IT skills to share with the wider team or appealing to a different client demographic.

An apprentice is there to fill the skills gap in your firm – whatever that may be.

LinkedIn: @pimfa

Expand your business with an apprentice If you’re interested in offering an apprenticeship to your employees, the NMBA is a registered apprenticeship provider and delivers a range of government-backed programmes for financial advisers, mortgage advisers and paraplanners.

There’s still time to secure one of the final places on the financial adviser programme starting 1 October 2019.

Alternatively, you can find more information on all of our available courses by visiting our website.

Jennifer Parker, Head of NMBA NMBA www.nmba.info

...it’s a highly costeffective training solution, with up to 100% funding available.

www.pimfa.co.uk

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Keeping the trillions of family wealth: how to win next-generation clients

The coming decade will witness an unprecedented shift of trillions of assets to the generations that follow the baby boomers. Ian Woodhouse, 26 26

head of strategy and change at Orbium, explains why wealth managers must overhaul their services to keep pace with a younger market.

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The key to success is to understand that many Gen X, Gen Y and millennial clients will want to manage their assets differently from their baby-boomer parents and grandparents.

Over the next decade, wealth managers face a looming challenge: a massive transfer of asset ownership from existing, ageing “baby boomer” clients to the next generation.

This “wealth in motion” will trigger an unprecedented and fundamental shift in the client base, with the consultancy EY suggesting that more than 80 per cent of family-owned businesses worldwide will change hands in the next decade1. In the UK alone, a 2019 survey of wealthmanagement clients by the investment company Brooks Macdonald2 found that they anticipated transferring around £327 billion of assets to younger family members by 2029.

The challenge is compounded by a rapid slowdown in the growth of managed wealth. According to Boston Consulting Group3, the annual rate of increase of personal wealth under management fell from 7.5 per cent in 2017 to 1.6 per cent last year. This slowdown looks set to continue as clients become increasingly risk averse amid uncertainty about the impact of a range of political and economic issues, from the escalation of the US trade dispute with China to signs that the bull-run cycle may be ending.

In this difficult global market, wealth managers must develop strategies to retain next-generation clients, whose loyalty cannot be taken for granted. The key to success is to understand that many Gen X, Gen Y and millennial clients will want to manage their assets differently from their baby-boomer parents and grandparents. Seen in this light, the challenge of wealth in motion is also an opportunity for the smartest wealth managers to make themselves indispensable to younger asset owners, who will need expert guidance in order to conserve and grow their inheritance in volatile, uncertain times.

asset flows is over, given the prospect of continuing global political and economic turbulence. Additionally, nextgeneration owners are likely to be more diverse, and have more nuanced demands, than their predominantly white, male forebears. One obvious example is the emergence in recent decades of wealthy, active women investors, not only in Western societies but also in more socially conservative Asian and Middle Eastern countries.

The most successful wealth managers will also be attuned to how the demands of nextgeneration clients will vary between emerging and mature Leaders and laggards markets. In Asia, the most At Orbium, we see a widening significant asset transfers gap between industry leaders will be from first- to secondwho are seizing this chance generation clients who are and those trailing behind. To already displaying a marked understand what the winners do preference for entrepreneurial differently, we have launched wealth creation over investing in a comprehensive research financial markets. In Europe and project in collaboration with North America, environmentally major wealth managers. Based conscious Gen X, Gen Y and on our initial feedback, we have millennial clients are driving the identified a series of critical growth of ESG investments. At insights and actions as wealth in the same time, low or negative motion gathers momentum. interest rates in Europe are intensifying a search for Firstly, wealth managers greater yields, with younger owners increasingly attracted need to grasp that the era of to hard asset classes such as advising baby boomers on infrastructure and real estate. relatively stable, predictable

1. Vontobel Wealth Management Inspiration magazine, 2018 2. https://www.brooksmacdonald.com/insights/intergenerational-wealth-transfer-rising-challenge 3. https://www.bcg.com/publications/2019/global-wealth-reigniting-radical-growth.aspx twitter: @PIMFA_UK

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www.pimfa.co.uk

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At an operational level, our research suggests that wealth managers must adopt four key short- and medium-term business insight and technology innovation actions to build successful, long-term relationships with nextgeneration clients: • Broaden expertise: a narrow offering of asset classes is no longer adequate. Wealth managers will require capability across the full investment landscape, with expert coverage extending to property, ESG and other alternative asset classes.

• Leverage existing relationships to develop deeper insight: managers should act as trusted advisers ahead of clients making wealth transfers. It is important to gain deeper client insight, not just of current wealth owners but also access to, and insight on, their next-generation heirs. This enables guidance to be offered to both on issues ranging from succession to wealthtransfer planning, along with support for heirs to cope with managing significant inheritances successfully.

• Harness existing technology: channels such as smartphones and web enable improved digital service models more suited to next- generation clients. Digitalisation also reduces costs, increases speed to market and maximises scalability.

• Exploit emerging technology innovation: artificial intelligence (AI), machine learning and other advances are also transforming how wealth managers serve clients. In particular, analysis of greater volumes of high-quality data enables more targeted personalisation and advanced riskmanagement solutions.

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Early leaders: the winning difference There are already emerging success stories in the new wealth environment. For example, Coutts is focusing on new money from entrepreneurs and from multiple generations to complement its traditional money business; new clients are up 13 per cent in the first half of 2019. Credit Suisse has also boosted its new money intake through its “bank for entrepreneurs” concept, underpinned by digital technology. Lombard Odier is reaching out to younger, eco-aware clients with its advocacy of environmentally sustainable investment.

One fact is already clear as the industry enters next-generation territory. The logic of wealth in motion dictates that wealth managers cannot stand still, relying on outmoded business models designed for an era of traditional wealthy clients. Over the next year, Orbium will report back regularly on our research into how a rising cohort of younger, diverse, highly demanding new asset owners will impose radical change on the industry models.

Ian Woodhouse, Head of Strategy and Change Orbium www.Orbium.com

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The Personal Investment Management & Financial Advice Association

PIMFA MEMBERS MANIFESTO OUR 6 PILLARS

Enabling access Designing a sector for the future – to the sector – including such as promoting developing the the sector as a post-Brexit force for good, rulebook, future highlighting its employees and importance in skills, diversity and building personal inclusion financial futures; targeting policy that acts as an enabler

Ensuring appropriate and proportionate regulation – this includes advocacy on the accumulation of regulation, costs, Financial Services Compensation Scheme (FSCS), Financial Advice Market Review (FAMR), Financial Ombudsman Service (FOS), General Data Protection Regulation (GDPR), Markets in Financial Instruments Directive (MiFID II) etc.

and thriving markets – enabling retail investment in markets

Enabling business protection – through data protection and cyber resilience

Enabling digital business transformation – through a sector digital strategy

Developing robust

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LinkedIn: @pimfa

www.pimfa.co.uk

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The Rise of Cryptocurrencies and the Question of Regulation On the 31st October 2008 a whitepaper entitled “Bitcoin: A Peer-to-Peer Electronic Cash System” was published under the pseudonym Satoshi Nakamoto with the opening statement in the Abstract: A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution. Relatively soon after, on the 3rd January 2009, the Bitcoin blockchain became live with the creation of the Genesis Block (Block 0). Embedded within this block was the coded Times newspaper headline of the day ‘The Times 03/Jan/2009 Chancellor on the brink of second bailout for banks.’

Thus began the extraordinary rise of the cryptographic currency in the modern-day

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lexicon, now shortened to ‘cryptocurrency’. But was this really the first use case of cryptocurrency? I recently had the pleasure of meeting with Temple Melville, CEO of The Scotcoin Project CIC, who enlightened me. It turns out that cryptocurrencies are almost as old as money itself.

Indeed, “crypto simply means concealed or secret.”

In 1989 there was DigiCash and in 1998 there was eCash.

Both of these were attempts at providing a digital system of money and both used different aspects of cryptography including digital signatures, proof of work and hashing.

As with many overnight successes, bitcoin didn’t do it all on its own but was built upon the foundations of significant good works before.

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“The use of cash has been declining for years in most western countries, and the Central Banks have realised that it will have to be replaced with something. To this end, both Sweden and Uruguay have run full-scale crypto trials which have largely been successful, though not set for full implementation anytime soon.”

The use of cryptocurrencies can and should mean social inclusion. Whilst Central Banks’ attitudes remained “Bitcoin is not a good idea”, it wasn’t just the central banks looking at cryptocurrency; financial regulators everywhere were watching this phenomenon.

The top-line question is simple: Is this cryptocurrency a security? If yes, then it should be regulated as such.

When it comes to regulating cryptocurrencies, regulators in jurisdictions all over the world have struggled. Not every cryptocurrency is the same.

Some are not currencies at all.

And herein lies the problem.

The first step of the solution is to build a system to classify any given cryptocurrency based on its function, its ownership and the intent of those who purchase the cryptocurrency.

According to Troy Norcross from Blockchain Rookies: “The topline question is simple: Is this cryptocurrency a security? If yes, then it should be regulated as such.”

twitter: @PIMFA_UK

In the early days of blockchain project development, coins were issued as a form of tracking and managing investment into a project. The idea was that when the project was live, these tokens would be redeemable for use within that project. Depending on the state of the project, these tokens could be considered securities and thus covered by existing regulation. If the project hasn’t been built yet, then the future value of the token is speculative.

In 2018, a new concept was introduced, STO (Security Token Offerings). These were actively promoting that they were securities and the companies behind them worked to be compliant with necessary regulation. As expected, this extra level of work to be regulatory

LinkedIn: @pimfa

compliant resulted in a significant drop in the number of offerings. Many companies decided to revert to traditional fundraising.

The third classification is tokenised assets. An example would be issuing a token which is backed by a piece of real estate, backed by gold or oil or a token which is backed by shares in a company. Each of these assets is a security and this tokenised security still needs to be regulated.

Most recently there has been much discussion and concern about Libra. Whilst it is true that Libra has blockchain as the basis for its operations, it is not a classic cryptocurrency. Libra is a currency. Full stop. With the massive potential to grow in both emerging and established markets, Libra could be the next global reserve currency.

www.pimfa.co.uk

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Regulators are paying very close attention and some - like France - are taking an active stance against Libra.

Many regulators started off with a light-touch approach as they were loathe to rush in and over-regulate for fear of stifling innovation.

Others took a firm stand against all forms of cryptocurrencies as they found them to be a potential threat to their monetary system.

In the end, the system of regulation is there for good reason, even if there are undesirable side effects

There were 2 ideas which made cryptocurrencies take off like wildfire. 1) The idea that anyone could buy-in, not just the insiders and the super-wealthy. 2) The idea that there was an opportunity for huge growth in value harkening back to the days of the DotCom era. With regulation, we are back in the space where only accredited investors can participate.

Regulators are protecting retail investors from unscrupulous businesses and speculators.

Norcross concludes by saying, “In the end, the system of regulation is there for good reason, even if there are undesirable side effects.”

James Bowater is City AM’s Crypto Insider and Founder of Crypto AM, the double-page spread appearing in City AM every Tuesday, a Founding Board Member of the London Blockchain Forum, Co-Founder of Vaureum International Mineral Resources Limited and Principal of Dene Place Curation Capital

www.cityam.com/crypto-insider www.deneplacecapital.com

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TOLD THEM EVERYTHING; HOW I’D FOUND MYSELF ENSNARED IN AXEL’S SCHEMES AND HOW THIS HAD EVENTUALLY LED TO MY FAMILY BEING HELD HOSTAGE.

TELL US HOW WE CAN HELP.

SHE CAN’T GO TO THE POLICE. THEY WANT HER TOO!

ELIX’S FATHER OFFERED HELP AND I ALREADY HAD A PLAN. A RATHER CUNNING PLAN!

OF COURSE! SUPERFAST 4G BROADBAND…

ARE YOU ONLINE?

ERFECT! 6

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IN THE NEXT EDITION YOU’LL FIND OUT HOW MY RESCUE MISSION WENT!

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Ahead of the Curve We work closely with clients to deliver next generation customer communications Across every sector, we have the experts who can transform your communications

Customer Experience & Marketing Business Process & Transactional Digital Customer Experience

Want to find out more?

Visit www.paragon-cc.com twitter: @PIMFA_UK

LinkedIn: @pimfa

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Between a rock and a hard place: how firms can handle diversity reporting and GDPR If GDPR has taught us anything, it’s that data and the rights around it cannot be ignored. Now, companies have to consciously consider how they use data and have rigorous systems in place to ensure it’s stored, processed and (when necessary) deleted properly.

At the same time, equality in the workplace is firmly in the spotlight with companies now expected to carry out diversity reporting, offering insights into what extent they encourage and support equality.

However, when these two issues come together, employers can be caught in a difficult situation as Cooley Partner Ann Bevitt explains: ‘Diversity data is especially sensitive and the GDPR recognises that the sensitivity of the data should influence the security measures taken to protect it. The more sensitive it is, the more you should do to protect it.’

Damned if you comply, damned if you don’t Article 9 of GDPR is particularly problematic and prohibits firms from collecting and processing ‘special’ categories of data such as racial origin, sexual orientation, health information, trade union membership, political opinions and religious beliefs. So how can firms report on their diversity levels without processing this data?

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‘Diversity data is especially sensitive and the GDPR recognises that the sensitivity of the data should influence the security measures taken to protect it.

The more sensitive it is, the more you should do to protect it.’

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Within Article 9 itself, there are exceptions for the use of ‘special’ data and it can be collected and processed if: • Explicit consent is given by the employee themselves • It’s necessary for specific rights/roles of the controller • It’s required for the employee’s vital interests and there isn’t time/possibility to gain their consent • It’s carried out in the course of legitimate activities with appropriate safeguards in place • It’s already been made public by the employee • It’s in public interest • It’s required for a health diagnosis of the employee

‘The Data Protection Act specifically contains public interest conditions relating to the processing of data for the purpose of equality of opportunity or treatment, and another relating to racial and ethnic diversity at senior levels of organisations.’

‘Transparency is key, letting employees know why they are collecting this data, for what purposes and to whom it will be disclosed,’

Compliantly engaging with diversity monitoring (the expert view) While firms may feel caught between a rock and a hard place, there are pre-existing legal defences as Miriam Everett, Partner and Head of Data Protection & Privacy at Herbert Smith Freehills, explains: ‘In the UK at least, the Data Protection Act 2018 comes to the rescue by providing additional lawful bases for the processing of special category data in the context of equality and diversity.

‘The Data Protection Act specifically contains public interest conditions relating to the processing of data for the purpose of equality of opportunity or treatment, and another relating to racial and ethnic diversity at senior levels of organisations.’

Aside from legal defences, there are other simpler ways employers can go about diversity reporting in a compliant way: starting with honesty.

‘Transparency is key, letting employees know why they are collecting this data, for what purposes and to whom it will be disclosed,’ said Bevitt.

twitter: @PIMFA_UK

LinkedIn: @pimfa

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‘The easiest way of dealing with this is to rely on an employer’s obligation not to discriminate and using diversity monitoring as a means of facilitating this, in which case you can rely on GDPR Article 9(2)(b) – but note that you will also need an “appropriate policy document” covering your collection and use of diversity data.’

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However, because employee consent can be withdrawn at any point, employers should explore how else they can mitigate potential risks.

For Pinsent Masons Senior Associate Leanne Francis, how sensitive data is used – and the amount of it – are key things employers need to be clear about.

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‘Organisations need to be mindful of when data is sliced and diced for analytical reasons,’ said Francis. ‘For example, a few years ago a client of mine wanted to understand career progression trends post-maternity leave.

But their analysis went past basic diversity monitoring and the only legal basis they had was consent, which can be withdrawn at any time.’

The data balancing act

Firms are faced with a balancing act and intuitive compliance oversight is required to ensure monitoring is carried out intelligently and sensitively while observing GDPR. This isn’t an easy task for firms but by approaching this data sensitively, and fully understanding regulatory objectives, they should still be able to carry out diversity monitoring.

Due to the high risk attached to special category data, this should only be collected if required for clear and legitimate reasons. Francis added: ‘You need to be able to demonstrate that you are actually doing something with the data. I know clients who simply by habit have collected data about employees’ religious beliefs but they don’t do anything with it or monitor it. twitter: @PIMFA_UK

‘It also helps to decide if data collection is proportionate to the objective. For example, if you’re trying to understand the careerprogression of women returning from maternity leave you don’t need to know how many children they’ve had.

Just by going through that exercise you can reduce the overall risk you’re open to.’

LinkedIn: @pimfa

Sam Roberts, Digital Marketing Manager, MirrorWeb www.mirrorweb.com

www.pimfa.co.uk

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Digital Innovation in Wealth Management The Wealth Management sector is rapidly evolving, since the upcoming generation of HNW clients is forcing firms to reinvent the client experience, and technologies that have been disrupting all industries across the globe are now also making a significant impact on this industry.

Customer expectations for their banks are now dictated by the standards created by digital giants like Google or Amazon.

According to Capgemini’s World Wealth report 2019, “in this era of hyper-connectivity, most financial institutions recognise the need for an omnichannel presence.

However, the challenge is to ensure that all channels perform efficiently and coherently to satisfy High Net Worth clients”.

Likewise, a recent report from Accenture* showed that among High Net Worth and Ultra-High Net Worth customers, “70% use digital financial services and 85% use at least three mobile devices. More than 40% said they were open to using mobile technology to check their portfolios and receive investment-related information”.

Adopting digital tools and methods of interaction with clients, in response to changing wealth demographics, usage patterns and client expectations, is no longer an option, but a necessity.

*https://bankingblog.accenture.com/going-digital-mobile-in-wealth-management?lang=en_US

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Correlation, simplification and differentiation.

These are the three pillars of the strategy with which financial institutions must work on the front office to transform the customer’s user experience. Connecting data and information, simplifying processes by redesigning the whole digital client journey and differentiating by adopting the right technology are the key guidelines for developing solutions, products and - above all - the strategic approach of banks. One such example is Brewin Dolphin’s launch of its ‘MyBrewin app’.

The UK wealth manager has extended its current MyBrewin online portal to remote channels, particularly to mobile devices, enabling clients to have easier access to their portfolios. The app has all the core features of the company’s portal, plus some features specific to mobile apps such as facial and thumbprint recognition. It is automatically formatted providing the appropriate user experience on the respective screen – tablet, phone or Apple watch.

The client app has been made available both on IOS and Android-based devices, and provides Brewin Dolphin clients with instant access to their portfolios. The App shows the investor a series of information, such as the list of all the transactions and the upcoming incomes. The user can select how they wish to view the portfolio (e.g. by asset class, sector, currency, geography), and check their portfolio allocation and performance.

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UK digital wealth solutions provider Objectway provided the technology for this user experience innovation, continuing a collaboration to further help Brewin Dolphin progress in their journey to enhance the digitisation of services to clients.

Digitisation, therefore, can enable a more fluid relationship and faster, real-time interaction with customers, on the one hand.

On the other hand, however, the new generations of investors also have a lower level of trust and customer loyalty to financial institutions.

The World Wealth Report, in fact, also reports that “fewer than 50% of High Net Worth clients are satisfied with mobile and online platforms, and around 40% of younger High Net Worth individuals reported lower satisfaction with their primary firm’s online and mobile platforms”.

Ultimately, in the modern age the most valuable resources for clients and financial institutions are aligned around time, investment protection and the reliability of the relationship and the opportunities presented by digital innovation remain key.

Alberto Cuccu, CEO, Objectway Ltd www.objectway.com

www.pimfa.co.uk

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Benefits of PIMFA Membership For My Firm

Influence

Participation

PIMFA engages with and lobbies policymakers to develop an appropriate regulatory framework, thus creating an optimal operating environment for our member firms

PIMFA members can actively engage in several committees and working parties that cover key topics including Regulation, Retail Markets, Financial Crime and Taxation

Access

Assistance

PIMFA members have full access to briefing documents and other guidance notes in the Members Area, as well as to data relating to the MSCI Private Investor Indices Series

PIMFA offers expert and confidential guidance on the myriad regulatory, policy and compliance challenges faced by the industry through our inhouse Regulatory, Policy and Research teams

Network

Information

PIMFA provides an industry platform for members to engage with peers through our wealth of social and promotional activities, including our Women in Wealth event series

Members can stay updated via PIMFA’s publications including the fortnightly Bulletin e-newsletter, technical bulletin Update, in-house magazine Journal, and other research

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To find out more just follow or visit us

Our Mission

Our mission is to create an optimal operating environment so that our member firms can focus on delivering the best service to clients, providing responsible stewardship for their longterm savings and investments.

What We Do

Events PIMFA members can attend over 60 events per year, including CPD seminars and Webinars, Regional Briefings, Technical Conferences and the flagship Annual Summit

Represent the diverse range of firms in the investment and financial advice industry with a unified voice

Be the undisputed industry thought leader, consolidating our extensive technical insights and expertise in research and policy work

Member Directory Improve your firm’s visibility by featuring in PIMFA’s member directory, with attracted more than 85,000 visits in the last year alone, and list your events in our industry pages

Lead the debate on policy and regulatory recommendations to ensure an optimal operating environment for firms and clients, maintaining the UK’s position as a leading global centre of excellence

Through our advocacy work, we promote the industry as a key catalyst to develop a culture of savings and investment in the UK

For more on members benefits or to become a PIMFA member visit us at: www.pimfa.com or email: membership@pimfa.co.uk

Promote a greater understanding of the sector and its role as a beneficial force in transforming the way people save and invest for the future

Facilitate dialogue across industry stakeholders, whilst developing bestpractice guidance

45 twitter: @PIMFA_UK

LinkedIn: @pimfa

www.pimfa.co.uk

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Would you like to contribute an article?

Alongside updates from PIMFA, the Journal includes several useful inputs from our associate member firms. These articles are an excellent opportunity to gain interesting insights into the wider industry and to learn more about PIMFA associate members. If you are an associate member who is interested in contributing to future editions of the Journal then please contact: Richard Adler, Director of Strategic Partnerships (richarda@pimfa.co.uk) or Sheena Gillett, Communications & PR Director (sheenag@pimfa.co.uk)

The Personal Investment Management & Financial Advice Association

Become a Social Butterfly Make the most of social media with a company personnel activity audit

Optimise activity Benchmark results Due Diligence • Deep dive into past activity of public social media accounts • Highlight any red flags that could cause problems or do not align with company values

Competitor Benchmarking • Analysis of people in comparable positions at competitor organisations to determine what they are doing differently and anything they are doing better

Highlight issues Auditing • Analysis of current activity and its effectiveness • Recommendations on areas for improvement to make the most of content

Contact: Kris Makuch, Director of Digital, Cicero Group kris.makuch@cicero-group.com

The Personal Investment Management & Financial Advice Association

22 City Road Finsbury Square London EC1Y 2AJ Tel: +44 (0)20 7448 7100 www.pimfa.co.uk Twitter: @PIMFA_uk Members: enquiries@pimfa.co.uk Non-members: info@pimfa.co.uk

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