© 2020 Arizent. All rights reserved.

Advisors: Is It Time to Digitize Document Management?

SAN ANTONIO, TEXAS - In light of looming changes in industry regulations and advances in current technology, advisors need to act now when it comes to making data and document management electronic, according to Timothy Welsh of Nexus Strategy, an advisor consulting firm.

With the SRO debate still undecided, Welsh said, no matter what happens regulatory changes will cause costs to rise for financial advisors.

"This is the convergence of technology and compliance that's hitting them right in the face and they literally have 18 months to get it done or they're gonna be toast," he said.

Welsh's presentation at the FPA Annual conference in San Antonio, The Connected Advisor: Staying Compliant in a Mobile World was sponsored by Laserfiche, a provider of enterprise content management systems and document management software, and laid out how firms might benefit from implementing an electronic document management software system integrated with compliance.

Increased operating profit, productivity and audit readiness were among the most compelling benefits for advisors.

According to a case study from the presentation, a potential 9% increase in operating profit from switching to an electronic DMS. Time saved by going to a digital system from a physical filing cabinet was 20 minutes for each trip to the filing cabinet according to one study.

Optical character recognition and full-text search capabilities of a DMS system would make the auditing process much less disruptive to an advisor's practice.

Not to mention how it would change the interaction with regulators. "When regulators come into you office, they say don't give us a box of papers. We want a CD ROM or a DVD," Welsh said.

But despite the advances in technology, and the clear benefits, advisors are still not adopting these systems.

According to Welsh, 81% of advisors don't have a true DMS in place, based on a 2011 technology survey published in Financial Planning and written about by advisor technology expert Joel Bruckstein.

Why? Welsh said it's inertia, advisors have a hard time changing and they don't know what to do.

"And the regulators don't help. They aren't telling them what to do. So advisors hold onto everything, they keep it all, and they're getting to a breaking point," Welsh said.

Currently, many advisors use only Adobe Acrobat to store files, according to FP's 2011 technology survey.

The problem is that such a system very quickly becomes too cumbersome and too difficult to manage and search. It's also not secure or integrated with compliance, and the advisor is on the hook for the data storage and server management said Welsh.

What about the cost of DCMs and ECMs? The cost barrier has come down, Welsh said. Such systems used to be only for Fortune 1000 companies, but now, data storage is much cheaper, with a cloud software as a service (SaaS ) available for about $100 a month.

Updating and digitizing document management appears to be an issue many advisors are thinking about or should be thinking about.

At another presentation Sunday morning, advisor technology expert Bill Winterberg talked about technology tools that advisors could implement today.

He covered over 30 different applications and services for advisors to consider, but he said the most important thing that advisors need to think about right now is technology that makes sharing and collaborating on files with clients easier and more mobile.

"I think that's where advisors need to go because their clients have an expectation now that working on their plan, working on their documents needs to be really easy and convenient. So advisors need to look for tools that offer that capability," Winterberg said.

And at least one advisor is trying to get his firm there.

John Ritter of Ritter Daniher Financial Advisory said his practice is 13 years old and looking for a digital document solution. He attended both sessions because it's something his firm is ready to update. For them, it's the last step to becoming "truly" paperless.

"It used to be easy enough to scan documents into our directory tree structure, Ritter said.

"But the larger you become the issue moves from "paperless" and "storage" to "retrieval" of the documents.  Who cares if you are paperless if you can't quickly put your fingers on the scanned documents that you need?"

As with many things in life, an advisor's practice gets more complex as it grows. And according to Ritter, the reason for waiting to implement a DMS, wasn't inertia

"It didn't really appear, until now, that the system was broken," he said.

"Only upon continuing to grow did it become more apparent that we needed a more robust solution."

What do you think? How are you using DMS?

For reprint and licensing requests for this article, click here.