Ian McKenna: This data protection bill is the real shake-up

Ian McKenna: This data protection bill is the real shake-up

There is a view in the industry that the Consumer Duty regulations confirmed in PS22/9 at the end of July, will be the most significant regulatory change in our industry for several years.

I see things differently. While the Consumer Duty rules are both important and welcome, another document published the week before will, in the long term, have an even more far-reaching impact on both our industry and indeed our personal lives. This is the Data Protection and Digital Information Bill.

Government and the FCA will be able to force savings, investment and life insurance providers to provide information to whoever their customers want

UK financial services outside the EU

This legislation is hugely important to not just the future of our industry but also the future of our nation. Repeated surveys show the UK as ranking second globally for tech start-up funding, the USA being the only country that out performs us, and London is ranked second only to the San Francisco Bay area as a fintech hub.

I have no desire to re-run the Brexit debate, in this column and while personally I voted remain, remain lost and it is important now to press on and make the best out of the situation we are in. Not least because I don’t think the Europeans would welcome us back on any sensible terms for a generation or more.

Technology is an area where the UK can make itself far more attractive than the EU nations as a place for inward investment, indeed technology is something of an Achilles’ heel for Brussels.

The recent announcement that Facebook, Instagram and WhatsApp owners Meta are moving large amounts of their operations to the UK with the creation of 4,000 new jobs is a great example of what can be achieved if we have a more positive attitude towards technology than our European brother and sisters.

Both the EU’s Digital Services Act and their Artificial Intelligence Act have been heavily criticised by the Centre for Data Innovation.

Their research suggests the latter will cost the EU economy €31bn over five years and that small to medium size business using an AI system deemed high risk would face up to €400,000 in compliance costs.

Given the sensitive nature of financial advice it is inevitable it will be a high-risk category. A note of caution is important we must be careful not to diverge too far from GDPR as to give the EU an excuse to withdraw our adequacy status and withdraw the free flow of data between the EU and the UK.

Pension Dashboards

Government has learned from the fiasco that the Pension Dashboards project has become. The main reason for the delays was that pension providers, especially certain trust-based schemes, were not going to make the investment to provide the data unless they were compelled to do so.

Both in their ‘Call for Input on Open Finance’ and their ‘Feedback Statement FS21/7’ the FCA made it clear that the Department for Business Energy and Industrial Strategy would legislate to make it possible to require industry involvement in the Smart Data Initiative including Open Finance.

Technology is an area where the UK can make itself far more attractive than the EU nations

It was also clear that once the enabling legislation is passed industries could be included in initiatives such as Open Finance via secondary legislation, thus significantly reducing the timescale to compel organisations to comply.

Clauses within the Data Protection and Digital Information bill appear to have exactly this effect.

The net result will be that government and the FCA will be able to force savings, investment and life insurance providers to provide information to whoever their customers want it sent to in a similar way to the consent structure used for Open Banking.

As soon as you start thinking about the interaction of Consumer Duty regulations and the Data Protection and Digital Information bill it become clear long terms savings organisations and insurers are going to need to do a huge amount of open access to data in the next 12 months, or 24 in the case of closed book providers.

This liberation of client data will be a huge benefit to advisers making full use of technology.

Ian McKenna is founder of FTRC

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