Data can either enlighten you or you can find yourself buried beneath it.
Last week, I questioned why the Financial Conduct Authority collects so much data and yet you rarely see the watchdog proclaim it had been used to spot potentially dangerous dealings of advisers.
This week, the FCA and the way it drags in data about the way you do business twice hit the headlines.
The regulator published a summary of why it collects information through the Retail Mediation Activities return and what it does with the information after a number of firms at the FCA’s Live & Local events asked how it uses this data.
According to the regulator, the data is an important part of the FCA’s supervisory approach “because it helps us to reduce the risk of poor consumer outcomes in the retail investment market".
Financial advisers don’t mind sharing their data – they just want to know it is being put to good use.It stated it uses the data to assess firms’ compliance with threshold conditions and other requirements, for example its rules on adviser and consultancy charging, conduct of business and prudential requirements.
In addition, the regulator claims the data allows it to spot trends in individual firms and in the market as a whole - to identify the firms to which we should allocate supervisory attention.
Later in the week, the smaller business practioner panel said requests for regulatory information within short timescales were a concern.
In response to these concerns, the FCA said: “Before issuing a data request, we conduct a firm burden analysis, which provides a breakdown of the firms in the requested sample, their existing regulatory reporting requirements and other data requests.
“Where possible, we seek to extend the deadline of data requests to allow firms sufficient time to submit information, reduce the scale of a data request or suggest alternate firms on the basis that those included in the original sample are heavily involved in other approved data requests.
“We give further consideration to those smaller firms who aren’t likely to have received a data request from us or who have had little interaction with us.”
In this day and age, we are used to handing over more and more details about ourselves.
We think nothing of signing up to supermarket loyalty cards that collate information about how much booze we consume, how many chocolate bars we devour and cigarettes we smoke.
Many happily share photographs of themselves enjoying too many tipples and toppling over at their work Christmas parties.
But we give this information in the belief it is in exchange for something. In the case of a loyalty card, we think we may get money off future purchases.
In exchange for those amusing Christmas party photos we posted on social media we hope to receive a thumbs up from our friends and witty remarks in the comments section on our Facebook page.
Financial advisers don’t mind sharing their data – they just want to know it is being put to good use.
To me, the FCA’s explanation of how it uses the data it collects doesn’t go far enough.
It would have been nice to hear: “The FCA banned X advisers this year due to concerns about the volume of pension transfers, which was initially flagged by the data it collects and then investigated.”
It would be even nicer to hear that this data was being used to create a regulatory dividend.
For example, if you were able to supply data that showed you to have an unblemished record when it comes to Financial Ombudsman Service complaints, shouldn’t you in exchange receive a regulatory dividend?
Why don’t the regulators retail mediation activities returns request a simple breakdown of the type of products advisers are recommending?
That way the regulator could be on the lookout for advisers pushing a large volume of Sipps and Ssas in order to invest in unregulated funds or to directly invest in companies.
The regulator is supposed to protect consumers. It needs to think more carefully about the data it collects and use it to weed out the rotten advisers.
Who wouldn’t be happy to share more data if it meant the regulator catching more dodgy advisers earlier on and making sure those who remain in the industry don’t have to pick up the bill for their wrongdoing when they collapse under the weight of compensation claims?
emma.hughes@ft.com
