If the results of Financial Planning's December 2007 software survey are any indication, more planners are starting to embrace the idea of using a document management system (DMS). About 38% said that they were not using any kind of document storage software.

This means that about 62% of the survey respondents are making some effort to go paperless. Yet the survey results also show that many planning firms are using inadequate document management tools or none at all.

Digital documents are cheaper to produce simply because hard-disk space costs infinitely less than paper and ink. And they're far less expensive to store because paper files can consume vast expanses of expensive space.

A properly configured and managed DMS affords immeasurably greater control and flexibility than paper files. In addition, digital documents enable greater security. When effective backup systems are in place, there's a much greater likelihood of recovery in the event of a disaster. And digital documents offer far greater security concerning who accesses them, when and how.

Traditionally, there have been legal concerns about using anything but paper. But there is no longer any legal downside to going paperless, as compliance experts say that images of key documents bearing signatures carry the same weight in legal proceedings as do signed paper documents. "I have clients who keep no paper," says Stephanie Monaco, a compliance attorney with Mayer Brown. As long as they are retrievable and legible, she adds, digital documents are as legally valid as paper ones.

Legally Superior

In some respects, digital documents may soon be legally superior. Authentication is perhaps the single biggest issue emerging in the field. In the not-too-distant future, advisors may face legal and regulatory demands to demonstrate the integrity of their documents. Firms can demonstrate the authenticity of their digital documents by using the DMS feature known as digital tamper-proofing. This feature puts a digital seal on documents, in much the same way that a pharmacist puts a paper seal on prescription medicine bottles. Cabinet NG offers this feature as an option).

Accordingly, a good digital filing system can help advisory firms meet their regulatory responsibilities to protect client data and keep it private. A well designed DMS includes security settings that can be customized according to who is requesting or seeking to view a document.

Access control the ability of employees to view, edit, copy or delete files can be controlled at the cabinet, folder or file level. This ensures that each employee is authorized for only the degree of access that principals deem prudent.

Some systems keep a log of every user's interaction with every document, and an accompanying audit-trail feature shows specifically who does what to which document when, including the application of annotation tools such as virtual highlighters, sticky notes, text tools and virtual stamps or watermarks.

The preferred method of annotation is an overlay, which maintains the integrity of the underlying document. But some annotation tools alter the underlying document. The solution is to make a copy of the original and annotate the copy, thereby preserving the original document.

Compatibility

All things being equal between systems under comparison, it's preferable to assemble a system with the capability to integrate with various other software in daily use at your firm. In particular, it would be helpful to have the dms integrate with your customer relationship management (CRM) application.

Many do, so it would be a good idea to check for this compatibility before purchasing. Cabinet NG, CEO Image Systems and Laserfiche offer some level of integration with Junxure, a popular CRM program. Cabinet NG and Laserfiche also integrate with ProTracker CRM software.

Spec It Out

Before purchasing a system, it's important to get a handle on what features you'll need to perform specific tasks in ways that meet your daily needs. For example, if you're going to be performing full-text searches—retrieving documents according to key words used within them—then it may be best to process the document with an optical character recognition (OCR) software package.

OCR software converts text into searchable text that can then be read by search programs. Some document management software packages include this capability; others do not. If the package you select does not include OCR capability but you occasionally need to perform OCR, you can purchase a separate product such as OmniPage Pro or Abbyy FineReader.

A DMS consists of a scanner to capture documents and connect with your PC or network, a driver to allow the scanner to talk to the PC, a scanning module (the software within the PC that receives images from the scanner) and software that files and retrieves documents within the PC. All of the DMS systems mentioned in this article include scanning modules, but not all DMSs on the market do, so they must be purchased separately. Even if your system comes with a scanning module, you may choose to add a different one, depending on the purposes at hand.

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