True data portability would offer a more standardized way for clients to get at their data easily and share it with another financial advisor.elenabs/iStockPhoto / Getty Images
Canadians who want to switch advisors or use more than one have a hard time sharing and transferring data, making it difficult for those trying to get a clear picture of their finances across multiple accounts.
But regulators are studying the issue of data portability, with the Canadian Securities Administrators’ Financial Innovation Hub (FinHub) conducting a public consultation that ended last month.
“Our data or digital footprint is growing massively from an individual perspective,” says Oskar Trpisovsky, privacy leader for the Greater Toronto Area at KPMG in Canada. “It makes a lot of sense to be able to take your own backpack of information that you’re carrying with you in the digital space from one place to another easily.”
Canadians already have the right to access data that companies hold about them via Principle 9 of the federal government’s Personal Information Protection and Electronic Documents Act, a.k.a. PIPEDA.
However, individuals don’t get to choose the format in which their data are delivered to them. True data portability would offer a more standardized way for clients to get at their data easily and share them with another financial advisor.
The CSA’s first test in its consultation focused on how data portability could make collecting clients’ information and the know-your-client (KYC) process easier.
The test follows the federal government’s exploration of open banking, which would force banks to share client data with other financial institutions, with client consent.
Canada’s open banking initiative is called consumer-driven banking (CDB).
“It hasn’t fully come into force yet, but we do have a data portability right that has come into force in the province of Quebec,” says Ryan Clements, chair of the CSA FinHub.
Good for advisors, good for clients
Client portability standards will enhance advisor productivity, Mr. Trpisovsky says, pointing to pre-approved processes as a key benefit. For example, electronic information-sharing could accelerate advisors’ KYC due diligence and accelerate onboarding.
Jason Pereira, senior partner at Woodgate Financial Inc., says client data portability would also allow advisors to increase their understanding of their clients by analyzing their behaviour.
“If I see they have a history where market downturns result in big changes in the portfolio – where all of a sudden they dumped everything into cash – I know there’s something there in terms of their risk tolerance that maybe doesn’t show up on the questionnaire,” he says.
Data portability also gives advisors a full view of contributions into registered investment accounts, such as tax-free savings accounts, so they can avoid breaking annual contribution limits unwillingly.
The benefits extend to clients, Mr. Clements says, as data portability makes it easier to switch advisors.
“If a customer can take their information from one firm to another easily, they’re less likely to be locked in due to the friction of onboarding or administrative hurdles,” he says.
The demand for data portability is strong enough that some companies base their entire business model on filling it. Montreal-based fintech Wealthica gathers financial data from multiple accounts to give consumer clients a clearer picture of their finances, says its chief operating officer, Billy Kawasaki.
“When you’re running four or five different accounts, automating is really important in terms of staying on top of all your finances,” he says. “We try to aggregate all the data and show it in one place.”
In April, Wealthica launched a version of its product for advisors, allowing them to see all assets under management for their clients across different financial institutions. The platform continually aggregates the data, with the clients’ consent, and produces reports for the advisor.
“Instead of running after statements from clients, they can get them straight away,” Mr. Kawasaki explains.
Wealthica uses application programming interfaces (APIs), where possible, to get its data. These are interfaces that enable online services to query a bank directly and get financial data in a machine-readable format.
However, he admits that not all financial institutions provide this capability. In those cases, the company has to scrape data directly from a company’s web interface, which involves using software that pretends to be a consumer accessing the site.
This lack of API capability among some financial organizations is par for the course, Mr. Pereira says.
“Companies often view friction in the data-sharing process as a moat – a way to retain clients and prevent switching,” he says.
Wish list
With the CSA FinHub’s study still in the early stages, there’s plenty to iron out. Mr Trpisovsky posits various business models that companies might use to exchange data.
One is directly with the consumer, leaving them to give the data to other advisors. Another is directly between advisors with the consumer’s consent, while a third could involve a central authority acting as a conduit.
Mr. Kawasaki is interested in having standardized APIs that third parties could use to access financial data.
Mr. Pereira would like a framework that acknowledges the client owns the data, with standards for sharing data sets and for security. He also says it must be consumer-driven.
“It cannot be industry-driven or bank-driven,” he says.