How to sell your client book under GDPR
Written on 10/08/2018

Emma’s Diary to be Fined £140k

Many will have read an article this week in the national papers about Emma’s Diary being fined by the ICO for selling data about new mothers to the Labour Party.

The information was used by the Labour Party - who must think our mum’s a good source of votes!

The selling of data has triggered some enthusiastic debate in Financial services.  

How do you sell your client book in the GDPR world?
For most retail financial services firms their key asset is goodwill. And goodwill is the client book.
When it comes to retirement – you have two options: either sell the client book or sell the shares in the business.
And if the firm is a sole trader or partnership, the shares are the lives, and indivisible from the individuals.  So shares cannot be sold, only the client book.

So how then do you sell your firm’s client book without getting fined by the ICO?

And don’t forget that regulation by the ICO is playground stuff compared to the Gulag resolutions routinely dished out by the FCA – most of which involve customer resolution programmes that push firms into insolvency, thus going unreported.  And breaches under GDPR are falling under the remit of FCA from 2019, making this subject even more sensitive.

The answer lies in being responsible for the data.  
IFAC suggest writing to all customers to ask their permission for the sale of the data.

Most takeovers in our retail financial services industry involve goodwill, not shares, simply because of the liabilities that stretch half way back over our lives.  Why take on shares for a business that may have advised a nurse to opt out of the NHS pension in 1990?  How would you know about it unless the said nurse suddenly put a claim in?  Believe me, the FOS will find against you regardless of the time bar, the notifications and the outcome of the 1988 to 1994 pension review.  

In future IFAC expect more sales of shares to take place and fewer sales of goodwill.  

This is good for the seller, of course, who benefits from 10% capital gains tax under entrepreneurs relief.

The sale of goodwill has anyway reduced in recent years as the number of firms trading as partnerships or sole traders continues to diminish.  

Most likely acquirers will act to buy shares, transfer goodwill to sister companies and thus phoenix the trading operation. In these cases the request for permission from the client under GDPR is controlled by the acquirer.

The sale of goodwill was for years considered the default option on a business sale.  Those days look to have passed as the industry sorts itself into larger retail firms based in the regions, and with more conventional business structures. 

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