How to strike the balance between privacy and client services

A blogpost by Wealth Dynamix has provided a review of a Financial Conduct Authority (FCA) keynote speech on how to strike the right balance between privacy and client services.

Back in November 2021, a speech by Jessica Rusu of the FCA underlined the responsibilities of those within financial services. Rusu described a threat landscape ‘shaped by new consumers flocking to high-risk markets and products such as cryptocurrencies and spurred by a sense of social competition’.

Wealth Dynamix noted that in protecting clients or customers from tech-savvy scammers, collaboration between the industry and the data regulator is the way forward.

The company said, “As the possibilities of hyper-personalisation emerge, wealth managers will be keen to increase AUM via a more intuitive and tailored client journey. However, in the context of regulatory compliance and data security, it’s clear that client data is marbled with a growing sense of responsibility and risk. Therefore, firms must take appropriate action to manage the risks, navigate the changing legislative agenda, and invest in systems and infrastructure to support their future data strategy.”

A key question raised by Wealth Dynamix in the blogpost was whether it is possible to collect too much data – continuing to ask when does monitoring a client’s habits tip the balance into a breach of individual’s privacy, adding, “These are the type of questions that need to be considered within the context of client preferences, current legislation and your data management capability. Though there will always be some grey areas, it will be up to data governance teams and relationship managers to determine where the moral line lies.”

The firm stated that it believed transparency will be vital, as clients’ ability to opt-out or in of what data they provide and how it is used is critical. By educating the client, this will aid onward engagement, only when individuals see value in the data divulged will the more discreet consumers be willing to share beyond onboarding – with a potential self-service option raised a key middle-ground compromise.

Wealth Dynamix mentioned that while open banking – another topic raised by Rusu – would seem to be a desired tool for wealth managers, amongst its delegates, ‘the jury was out’.

The company said, “Are clients open to a laser-focused account of where they are spending their money and how they might reach their investment goals faster by altering some habits? For many of our delegates at the recent business focused event, it felt a step too far.”

The stance of Wealth Dynamix outlined was to use end-to-end solutions to reduce risk, stating that while data can provide insight into a client’s preferences and portfolio amongst other things, an end-to-end solution can demonstrate its value using AI and ML to analyse the client’s data and other critical factors.

Wealth Dynamix remarked, “As more regulation and compliance measures arise, having a single data source, a means to analyse it, and a set of predefined next actions will help determine the parameters of the client relationship. In our opinion, this level of control will be a critical factor in the future, minimising the associated risks, removing doubt for relationship managers and allowing the forward-focused to outshine technology laggards.

“There’s a sense that more privacy tools are inevitable to protect the interests of the next generation of clients, given their fondness for high-tech, high-touch personalised services. And while no one can predict the future, we do know this: client expectations will only keep rising. It’s a landscape in which loyalty will be earned via relationship managers’ respect for their clients’ preferences and data security.”

Read the full blogpost here.

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