Your IndustryJun 29 2015

‘Advisers should embrace digital passports’

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‘Advisers should embrace digital passports’

Advisers should embrace ‘digital passports’ as they would drive lower fact find costs and decrease client risk, the Tax Incentivised Savings Association said, warning that the passport is necessary to meet the basic needs of customers.

The idea of a ‘digital passport’ is to have a voluntary system whereby consumers would give a limited amount of identification data to a central body, which would then share this with third parties to enable easy opening and transfer of accounts, using existing e-identification technology in place for passports and benefits.

Speaking to FTAdviser, David Dalton-Brown likened the wider market to that of adviser platforms a few years ago, which sprung into life when a few upstarts started using online technology to link IFAs with investment options.

“The digital market is starting to impact providers - some are still in catch-up mode, while new entrants are eating up market share,” he added.

“Advisers should embrace digital passports, they would lower fact find costs and decrease client risk. I think the next step after that will be for AI [artificial intelligence] based tools like those being developed in America, it’s only logical that this will be embraced by forward-thinking advisers.”

Plans were revealed back in March - along with several other requests of the new government to promote a savings culture in the UK - and Mr Dalton-Brown explained that a prototype was being built with the backing from a private company, while a working group for the project had the backing of the Financial Conduct Authority, Department for Work and Pensions and Cabinet Office.

The passport is necessary to meet the basic digital needs of customers, Mr Dalton-Brown added.

“I don’t want to be scaremongering here, but Apple Pay has arrived and if they wanted to leverage that brand and monetise their data resources, then it doesn’t take much to change the game,” he commented.

“We must be careful with the use of data though, it should only be owned by the client and cannot be monetised on the passport.”

Another area the Savings and Investments Policy project is pushing is for generic ‘guidance’ that everyone from charities to providers can offer consumers, that goes further than what is currently allowed by offering tacit recommendations to invest in a particular product from a limited list of simple options.

Mr Dalton-Brown stated that he hoped regulators could agree upon an industry-wide ‘kitemark’ that would enable consumers to be pointed people towards the right products, without straying into full advice.

“The FCA has tried to remove much of the grey area around this, but it’s still difficult to enter the advice market due to current regulation.

“This would be a set of questions that advisers could build into their model, becoming a bridge between execution-only and full advice, helping to build relationships with the middle market and even enable family groups to become clients.”

He added that while RDR has led to increased professionalisation of the industry, it has also meant a whole demographic of people can no longer afford to access advice, something which he hopes the guidance working group can fix.

The regulator’s final guidance defining thresholds around generic, simplified and full advice, published in January, stated that processes involving a limited selection of relevant products will still fall under the same requirements as full advice.

peter.walker@ft.com