OK computer

Some say love makes the world go round, but at the dawn of a new century the less romantic may argue that it is information that keeps the planet spinning.

Internet usage statistics illustrate the global information explosion perfectly. Reports show that 505 million people were online worldwide in December 2001 and, according to the Global Reach report on Global Internet Statistics, this figure is projected to reach 793 million by 2003.

With so much information freely available it is vital that controls are in place to ensure personal privacy is protected and individual rights are upheld.

The development of regulation is of course something we are used to in the financial services industry. For many years, IFAs have incorporated new industry regulation into daily working procedures and when the Data Protection Act 1998 came into force on 1 March 2000, it was treated the same way.

Data protection and IFAs

But this said, what are the wider implications of this Act on the work of an IFA, and how can an IFA's practice thrive and take advantage of new developments in technology with this legislation in place?

The first step is to understand the aims and principles of the Act. It places obligations on data controllers and gives rights to data subjects. An independent commissioner oversees compliance with the law and is responsible for:

• Promoting good information handling.

• Encouraging codes of practice of data controllers.

• Maintaining a register of data controllers.

• Prosecuting offenders.

• Interpreting and enforcing data protection principles.

Anyone processing personal data must comply with the eight enforceable principles of good practice. Data must be:

• Fairly and lawfully processed.

• Processed for limited purposes.

• Adequate, relevant and not excessive.

• Accurate.

• Not kept longer than necessary.

• Processed in accordance with the data subject's rights.

• Secure.

• Not transferred to countries without adequate protection.

Reference to the Act as part of the daily transactions of an IFA is commonplace, including the collection of data on application forms for individual life policies. However, it also extends to group schemes where the adviser, employer and product provider are all data controllers.

When you are discussing a new scheme with an employer you will usually prepare a report outlining the different options available which may include illustrations showing the benefits members could receive.

Often employees will be unaware of the employer's intentions at this stage. In many cases, employers will delay announcements about the introduction of a scheme until terms and costs have been agreed to avoid false promises.

But under the Data Protection Act, the employer should obtain permission from employees before releasing personal data such as names, dates of birth and salary information ' even though it is in their best interests.

Failing to obtain employee consent to release this information is in breech of the Act. The answer is to ensure scheme illustrations do not contain specific employee information, instead using generic information such as average salaries.

So, assuming the principles of data protection are adhered to, how can IFAs make use of the information they hold within the scope of the Act?

Golden data

A completed fact-find presents a perfect starting point to find out more about your client's preferences in a compliant manner.

As long as you have covered the use of personal information in the client declaration on your fact-find, in accordance with the Data Protection Act, you can use the information you have collected in many different ways.

Teresa Bird, marketing development manager with Norwich-based Crossley Mackenzie IFAs, says: 'We use the information on the fact-find to complete a full client picture on our back office.'

Gathering facts is required as part of the advice process. The secret is to make full use of the information you have.

'Golden data' is often buried in files. Since January 1991, large numbers of IFA clients have invested in Tessas, and most were set up through banks or building societies.

Nonetheless, on thousands of fact-finds you have carefully noted which clients have taken out a Tessa. More often than not you will know from your facts a start and maturity date and how much was invested. All you need to do is dig the information out and contact the client. You might be surprised at the new business opportunities this creates.

A good back-office client management system is key to success. Desktop software that empowers IFAs to complete full lifecycle electronic sales and business monitoring processing is now being developed to provide support in these areas.

Keeping in touch

Email is a good way to keep in touch with your clients and electronic newsletters mean that at the press of a button several hundred can be distributed. While it is certainly true that it is not possible to email a handshake, it can move you closer to one.

New technologies allow you to enjoy closer involvement with clients and collecting email addresses on the fact-find is a cheap, cost-effective way of keeping in touch.

Under the Data Protection Act however, an email address is classed as personal data. This means your email header should not display details of addresses included on the distribution list as sharing this information with a third party without consent breaches the Act.

But increasingly it is recognised that although technical and financial analysis of a client's circumstances is vital, it is only part of the reason why they decide to place business with you.

Emotional intelligence skills, such as the ability to empathise with clients, understand their needs and deliver the information they need in the right way at the right time, are also critical.

To do this you need to maintain a detailed, client-focused database as this gives you the competitive advantage of being at the top of a client's mind when they decide to buy.

Combining the economic value and the relationship value unlocks the true potential of each client.

There are organisations that have invested millions of pounds establishing systems to profile business customers. The longest established profiling system in this country is ACORN ' 'A Classification of Residential Neighbourhoods.'

The fundamental thinking behind ACORN, and indeed all the other profiling systems is that 'birds of a feather flock together.' In other words, if you have a good customer in Acacia Road, Leeds, the chances are the other people in Acacia Road would also would also be good customers. If you could find other locations where area housing and lifestyle were very similar to Acacia Road, they too would be good customers.

Other organisations have developed systems such as MOSAIC and EXPERION and are working to develop psychological profile systems that point to an individual's propensity to claim under their insurance policies.

Alliances with other professionals such as accountants and commercial insurance brokers can also provide a way into the corporate market.

Growing numbers of high growth start-up businesses are flourishing in science and technology parks and many IFAs are unaware of their existence.

The number of opportunities for IFA businesses are endless, given proper planning, a dynamic and appropriate client relationship management database system coupled with the client relationship skills enjoyed by the owners of IFA businesses.

Mark Summerfield is sales and marketing director at DBS Financial Management