Your health is your wealth

Some financial planning firms are using fitness data to complement their client service, but it is yet to be fully harnessed by the sector
by Jake Matthews

The term ‘big data’ has eased itself into the lexicon of planner-client language with apparent ease. Now, ‘biodata’, the biological data of an individual, is set to do the same. 

A report in October 2016 by the Financial Planning Standards Board (FPSB), Fintech and the future of financial planning, collates the thoughts of 1,700 CERTIFIED FINANCIAL PLANNERTM professionals from 26 of its member organisations across 29 countries. The professionals are asked about the positive and negative implications of the biodata-client relationship.   

Respondents say that this non-financial information will become increasingly relevant to financial planners, bringing greater precision to their client offerings and aiding in the formation of deeper planner-client relationships. 

Such information will allow planners to track progress and positively reinforce behaviour that is beneficial to the client, and enable access to more accurate and complete financial information. Financial planners can also better understand how to guide a client towards their desired financial and life goals. 

A client can give their planner access to their fitness information by linking the relevant fitness app or device to an online profile that their adviser can see. In practise, this means that a client who stops smoking and becomes fitter could see their premium on health insurance reduced. This would also increase their life expectancy, meaning a financial planner would have to modify their client’s financial forecast and, potentially, their investments.
It had analysed the shopping habits of a high school student with an algorithm that determined that she was pregnant However, with this increased information comes increased risk of theft, fraud and ever-evolving cyber security threats. Currently, the seventh principle of the Data Protection Act dictates that those who hold personal data must have the appropriate security to prevent it becoming compromised. This legislative requirement hasn’t translated to consumer trust though. A 2017 YouGov survey finds that 12% of consumers are concerned their data might be stolen and a fifth are worried about their personal data being sold on.

This isn’t the only downside. Knowledge of pre-existing health conditions could lead to potential discrimination – for example, a premium increase for a client with a pre-existing condition – and give rise to ethical or legal issues that may result from the interpretation of this information by people who are not healthcare professionals. 

Take US discount store retailer Target, for example. In 2012 it was widely reported that it had analysed the shopping habits of a high school student with an algorithm that determined that she was pregnant. She was sent pregnancy related coupons before she even knew she was expecting, thus inadvertently notifying her father of the news. It is not beyond the realms of possibility for biodata to notify financial planners, implicitly or otherwise, of news their clients may not be aware of.  
Personalised pension potsDespite the downsides, using biodata to personalise financial products can lead to improvements in health and levels of wealth for clients.

Just, which specialises in retirement products and services, already uses medical data to inform its client offering. 
"It’s critical that the financial services sector has good security protocols in place"The company says it has “positively disrupted” the market by personalising its Guaranteed Income for Life (GIfL) solutions with information about medical conditions the client may have, their blood pressure and cholesterol levels, and other lifestyle factors such as smoking and alcohol consumption. As a result, many clients receive a typical increase in income of over 20% – and, for some, it can be 50% or more.  

Stephen Lowe, communications director at Just, explains how this works: “This additional information enables us to make a deeper assessment of how long the client may live – and this underwriting assessment enables us to more accurately establish an offer to the client.”  

Insurance company VitalityHealth offers lower premiums for physically active policyholders who maintain or improve their levels of health. The company monitors healthy lifestyles via activity trackers such as an Apple Watch. 

Scalable Capital is a digital wealth management firm that uses risk management technology to provide globally-diversified and personalised portfolios which are determined by their investment algorithms. The user sets the risk level for the portfolio – which modifies the investment strategy accordingly – because, says founder Adam French, “everyone has a different risk tolerance”.

Adam says that this data gathering process, via a questionnaire, can be replicated by fitness apps to deliver a tailored service to clients. “In the future, you could imagine this data being collected in the background via access to other data sources such as banking data, social media accounts and many more.”  

How much or little biodata is shared with a financial services company is entirely up to a client and their financial planner. However, more data equals a more complete picture, and a potentially better financial outcome. 
How do clients feel about using personal data to tailor solutions? 

According to PwC’s 2016 Sink or swim: Why wealth management can’t afford to miss the digital wave, two-thirds of high-net-worth individuals (HNWIs) under the age of 45 have a positive attitude towards personal data from apps or websites being used to tailor information, products or services to their needs. However, 59% of older HNWIs feel negatively about this. 

The study finds that the perception of personal data’s prevalence is underestimated – 91% are aware of apps using personal data, but only 61% of respondents think they use apps that utilise personalised data. In reality, 84% use at least one app that collects and uses personal data, but only 68% of respondents think they do.  
Building trustAs of May 2018, biodata and genetic information will be considered sensitive data under the new General Data Protection Regulation (GDPR).  

Adam cites the findings of a recent PwC study, Financial services technology 2020 and beyond: Embracing disruption, showing that 69% of financial services’ CEOs are either somewhat or extremely concerned about cyber threats. “Before embracing non-financial data – and, in particular, health data – it’s critical that the financial services sector has good security protocols in place.”

Clients are also somewhat reluctant. Big data, artificial intelligence, machine learning and data protection – a study from the Information Commissioner’s Office (ICO), an independent UK authority that upholds information rights – says that only 29% of UK adults trust the financial services sector to use their personal data responsibly.

“Getting data protection and privacy right is a vital part of building and protecting consumer trust and should be seen as an essential part of the solution for business success,” says Garreth Cameron, ICO group manager for private and third sector engagement, speaking on behalf of the ICO. 

This is especially important when the data concerned is sensitive. For example, if it relates to a person’s health or biometric information. 
GDPR shake-up Next spring’s GDPR shake-up should help to build confidence among planners and clients about using data generated by ‘wearables’ – gadgets such as the Fitbit or Apple Watch.

As a result of the shake-up, the rights of individuals will be strengthened and a stronger emphasis will be placed on businesses to be transparent and accountable. Organisations must also ensure client consent is freely given; there must be affirmative and clear action – for example a positive opt-in – from the individual and withdrawal of consent must be simple.

This article was originally published in the Q4 2017 print edition of The Review. The print edition is available to all members who opt in to receive it, except student members. All eligible members who would like to receive future editions in the post should log in to MyCISI, click on My Account/Communications and set their preference to 'Yes'.   
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Published: 29 Dec 2017
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