“Freedom isn’t free,” sang Team America, World Police, “there’s a hefty [blooming] fee.”
This time it appears our smart voice-responsive TVs are listening to us and sending our deepest, darkest conversations back to a voice-processing data centre somewhere in the Mojave Desert. I wish them joy parsing discussions about whether to start watching The West Wing all over again and pointed comments about “you’re not going to have another whisky, are you?” but some people might have trade secrets, I guess.
So our theme this month is data, how it gets used and what for, and what control you as advisers can have.
False economy
It’s a well known meme that if you use something online without paying for it, that thing isn’t the product; you are. You are the thing that’s being sold. Your information, your usage stats, your data is worth something to someone somewhere. Sometimes even when you are paying, you’re still the product, because you’re being subsidised. Smart tellies would probably cost more if Samsung, LG and the rest couldn’t monetise your data somehow.
If you ever thought that wasn’t the case, news broke the other day that the Conservative Party has been spending more than £100k a month on Facebook targeting to generate ‘likes’, which will then allow them to relentlessly spam hapless Facebookers with election messaging. That’s a lot of money to find out what people had for dinner (I offered to send them pictures of mine for £2k a month, they’re getting back to me).
Ever wondered how brands like Facebook, Twitter and Google monetise themselves? This is how.
Let’s jump over to our own industry for a bit. I think we have a few issues to deal with here. Firstly, some generalisations which I think have a ring of truth about them.
1. Advisers hate paying for stuff they can get for free
2. Advisers are pretty lax at data security
3. Advisers are pretty bad at information technology
Now, those are generalisations, and of course I didn’t mean you, you’re great at IT, you pay for all your software, and you’ve got a bombproof data protection policy in place. No, no, this is other firms. (Joking aside, we do see some firms really putting an investment into IT and security, which is great. That isn’t restricted to large firms, although they have the issue front and centre; some small firms are really putting thought into it now.)
Data protection and data usage is a stultifyingly dull topic – if you’ve read this far I don’t need to tell you that. And I should know, having written the data protection chapter for the CII J11 Wraps & Platforms coursebook (see earlier whisky comment). But it is important. As advisers capture more, richer, information through explorations of clients’ goals, hopes, attitudes and aspirations – as well as existing investments and arrangements – the security and integrity of that data is paramount. How much would Car Finance Company A pay for the knowledge that your client is saving to buy his daughter her first car?
I don’t know any companies supplying advisers who plan to let data out on an individual basis. But many do supply it on an aggregated basis, usually for a fee. So here’s an (unrealistic, extreme) example.
Thing Comparison Service A charges advisers £50 per month for running comparisons of Things, but promises not to make any usage information, in aggregate or at firm level, available to the providers of those Things. Thing Comparison Service B is free for advisers to use, but sells user data subscription packages to providers at £25k a pop.
Which do you use? If you’re not paying for it, you’re the product being sold. What is your data as an adviser, or your (anonymised) client information worth? Is it more than £50pm? If so, you’re getting a bum deal with the freebie. You could sell your own data and make more.
But you wouldn’t, because you have ethics. You are the agent of your client, and are there to ensure they have the best financial planning money can buy. Not to punt their data out to the highest bidder so marketing teams can optimise their media mix and target you with new Things more effectively.
If you wouldn’t sell your own or your clients’ data directly – legally, within the confines of the Data Protection Act – why would you sell it indirectly?
In reality, life is more nuanced. Oftentimes those who charge also sell data, so you’re getting a lollipop with two fuzzy ends, and nobody wants that. On that basis in our example above, if you are being ramrod straight, can you in good conscience use any system, however convenient, which sells data back to the providers who are being analysed by the system?
Maybe convenience trumps integrity here; I don’t know. But I do know that whenever I ask an adviser about how data moves around their business and their suppliers, few if any can tell me.
Top security
I don’t think this kind of thing will be part of the FCA thematic review on due diligence later this year. But it should be. We see from the uproar about smart tellies, Facebook likes and the rest, that it matters very much to individuals when they find out about it. Not before, perhaps (I can already see the comments below the online version of this saying ‘I’ve never had a client query our IT security, yadda, yadda, etc’). But after.
Let’s jump out the industry for another example. Many firms use Dropbox as an online document storage facility. It’s an outstanding service – my business uses it too – with several levels of service available.
A basic account is free and gives 2GB of storage; an upgraded Pro account is £7.99pm and gives you 1TB of storage, and the Business level (which we use) is £11 per user per month and gives you unlimited storage.
Most people think that the difference between the levels is the amount of storage and the price. It isn’t. The security levels are.
Dropbox isn’t insecure. It takes advantage of the US/EU ‘safe harbour’ rules (which allow you to use it as advisers despite its data centres not being in the EU) and uses 256-bit AES encryption, which is as good as the banks. It’s a damn sight safer than carrying around USB drives. That holds true for all levels.
But as you move up through the levels, you get much more control over data. Depending on what level you select, you get remote wipe facilities, access control, 2-factor authentication (which is important for mobile usage) and more.
In a highly unscientific survey I did of smaller firms with one to three RIs a little while ago, most firms using Dropbox used the free version because ‘we won’t get anywhere near 2GB and it’s free, innit?’
Most advisers’ offices have a burglar alarm, and locks on the windows and doors. Most advisers would say that client trust is their most valuable asset. And yet too many adviser firms treat precious data with what, to an external observer, would seem like a cavalier carelessness.
Data is power, and money. Advisers control a huge amount of it, both on your firms behalf and on behalf of your clients. You owe it to yourselves, and your clients, to understand exactly how data will be used by each link in the chain you assemble to make your practice work. If you’re not happy with how someone treats your data, or how secure it is, ask yourself if you’re simply using a service because it’s free, or convenient.
Again: freedom isn’t free. If you’re not paying for it, you’re the product being sold. The thing is, in our industry, it’s not just you, and it’s not just anodyne blathering about box sets.
Mark Polson is principal of platform and specialist consultancy the lang cat
