Financial advisers need to see the business opportunity in upcoming European rules on data protection, rather than just treating them as a compliance issue, it has been claimed.
Ben Leonard, the founder of consultancy firm Meta Finance, said the arrival of the General Data Protection Regulation (GDPR), which comes into effect in May, would give advisers the opportunity to improve their business models.
He said he realised how much financial advice firms could benefit from improving the way they use data through his involvement in the Financial Advice Market Review.
Mr Leonard said: "I saw there were parts of the financial services industry, like financial advice, that were incredibly inefficient and could benefit from pretty basic technology. The use of personal data is a way of making the industry more efficient and delivering a better customer outcome at the same time.
"People's personal data can be used for their own benefit, it can derisk the organisation's proposition and make it cheaper for them to deliver their services.
"The advice gap is a good example. If 70 per cent of the cost of delivering advice is administration, then in theory you can get more good stuff out to more people if you use man and machine rather than just man and a lot of spreadsheets."
"This year, how you use data to grow your company will be an interesting theme. Most firms see it as a compliance requirement but there are a few waking up to how their strategy will depend on how they react to General Data Protection Regulation (GDPR)."
General Data Protection Regulation introduces a number of rules which will affect financial advisers, including the right to erasure, meaning an individual can request the deletion of personal data relating to them, and the right to access, meaning an individual can demand information on how their data is being used and a free copy of their personal data.
It also introduces the right to data portability, which means a person must be able to transfer their personal data from one system to another without being prevented by the handler of their data.
Meanwhile explicit consent must be obtained for the collection of data and all the purposes it is used for, while all data breaches must be reported within 72 hours.
Speaking last week, chief ombudsman Caroline Wayman predicted the use of customer data by the financial services industry could be the next cause of large numbers of complaints after payment protection insurance dies down.
She said the greater use of client data made it easier to access financial services but warned this also came with drawbacks.
Mr Leonard, who used to work at HSBC, founded Meta Finance to provide consultancy services to mid-level firms on improving their use of technology and data.
The company provides coaching, community forums and technology, such as dashboards, to help firms and their employees stay on top of the way technology is changing the financial services sector.