Conceptually, online document management systems have intrigued advisors for years. It is easy to understand why. IT professionals maintain the hardware and the software, perform the upgrades, back up the system, and are responsible for most of the disaster recovery plan. All the advisory firm is responsible for is paying a fee and contracting for broadband Internet access. If the advisory firm makes use of online applications extensively, it can reduce and possibly eliminate the need for servers, networking equipment and IT staff.

In practice, however, few advisors have implemented online document management systems. A number of factors might explain the low adaption rates. One is the historic performance difference between desktop applications and Web-based applications. Desktop applications have been more flexible, more responsive and faster than online applications. Recently, however, the performance gap has narrowed substantially. Today's Web applications are much better than they were just a few short years ago. They look and feel much more like their desktop cousins, and they are faster.
Another knock against previous Web-based systems was the price of online storage. Now, in many cases, online storage has dropped to the point where it is more competitively priced.

A third reservation often cited is "security." This concern was and still is largely a myth. Compared with the average advisory firm, professional storage firms offer superior security. Data is generally stored in highly secure, professionally designed and monitored facilities that smaller independent financial advisory firms cannot hope to replicate and it is transmitted securely over the Internet.
I recently visited with two online providers of online document management and storage, NetDocuments and Redtail Technology, to see what they had to offer.

NetDocuments
    NetDocuments (http://www.netdocuments.com) is virtually unknown in financial advisory circles, but their management team has a long history in the document management business. Ken Duncan, its president and CEO, was a co-founder and CEO of SoftSolutions Technology Corp., which pioneered LAN-based document management software. In 1994, SoftSolutions was sold to WordPerfect and Novell. NetDocuments was founded in 1998, but until recently their primary market has been law firms.
Getting started with NetDocuments is easy. You can go to their Web site and register for a 30-day trial. This is a good way to get acquainted with the basics of NetDocuments, like scanning and the underlying file structure. But to really understand all the features the application has to offer, you either need to spend a good deal of time reading documentation, or you need to set up an appointment for a full orientation.

When you first log on to NetDocuments, you are transported to a customizable Home page. You can create up to three columns, each with multiple headings. Each section can contain shortcuts to other parts of the application. There are also shortcuts to search, scan, save a link, etc.

The macro organization of NetDocuments is like that of many desktop and server-based applications. The document repository is made up of one or more filing cabinets. Each cabinet contains folders. These folders can contain subfolders. Folders and subfolders contain documents. As a practical matter though, most advisors will not use the folder structure to navigate the application. That is because NetDocuments includes something called Workspaces.
Workspaces are pages based upon a specific attribute. A financial advisor might create a workspace for a client, a household or perhaps a project.             Typically, when you sign up for NetDocuments, they will help you create one or more workspace templates. If you create a template for clients, you might have a section for client correspondence, another for income-tax-related matters, one for statements and trade confirmations, and yet another for performance reports. You then upload a client list, and then apply the template to all your clients. This would create an identical workspace for each client with all the sections mentioned above.

If many employees were involved in a project, you could create a workspace where all those responsible could access related materials. For example, if your firm wanted to offer a series of seminars, all employees involved in planning and implementing them could get what they need in the workspace created for that project.

The platform has a TWAIN interface that allows you to scan directly from most scanners into NetDocuments. Whether your scanning software is TWAIN, ISIS or something else, you can scan to your hard drive first and then import the file into NetDocuments. A third option is to create an ND auto import folder and scan into that. When you scan into the ND auto import folder, all folder contents will automatically be uploaded to NetDocuments.

Once you get documents into the application, it manages them well. If you open a document, the application marks it as checked out. This means that you can edit the document (assuming that you have permission). Others can view a document while you have it checked out, but nobody else can edit it until it is checked in. All actions related to a document (views, edits) are logged, so there is a full audit trail. Search features are quite sophisticated, so finding what you need should not be a problem. You can search by keyword, other attributes, or you can perform a full text search.

Security also is very good. The administrator can control exactly who has access to what, as well as what type of access they have (read-only, edit, etc.). The program has a full audit trail, so it tracks every user interaction with every file in the system. It also allows you to set retention policies. If you do so, the system will send an alert every 60 days flagging documents scheduled for destruction.

While NetDocuments isn't designed to archive all e-mail passing through an MS Exchange server, it does have some useful e-mail capabilities. Every folder has an e-mail address associated with it, so you can e-mail directly to any folder. In addition, if you use an Internet fax service, you can use your provider's forwarding capabilities and have a copy of faxes forwarded by e-mail to the appropriate folder.

With an optional module, it is possible to save individual e-mail items from within MS Outlook. In addition, if you create a subfolder for each client in MS Outlook, you can have a utility monitor those Outlook folders and automatically copy all e-mail to a corresponding folder in NetDocuments. This will not necessarily provide you with a comprehensive e-mail archive, but it will make all e-mail from a specific client available in the client workspace within NetDocuments.

Besides the basic features that you'd expect, NetDocuments includes some interesting advanced features. Many of these are not apparent to novice users, and many are turned on by default, but they are worth discovering. I'll just highlight a few.

Since NetDocuments is a Web-based application, you can share individual files and folders with others. For example, on a client's workspace you might create a folder for the client to view certain reports. If you did not want the client to see the other folders in the workspace you would be able to do that.

Another feature the application offers is echoing, which allows you to retain a local copy of a document on your hard drive for a specified period, perhaps ten or 20 days. Echoing can be useful in a number of situations. For example, if you work in an area that experiences intermittent Internet outages, echoing would allow you to work on your recently accessed documents even if the Internet went down. Echoing can also improve Internet access speeds, particularly if your connection or network is slow.

Another nice feature is the ability to add a NetDocuments search option to the Internet Explorer browser search box. This would allow you to search the NetDocuments repository even when you are not on the NetDocuments site. Firms that have Microsoft Active Directory services on their network can allow users at their own workstations to automatically log on to their NetDocuments accounts. NetDocuments also offers a special interface that allows users of some Blackberry, Treo and Windows Mobile devices to access the application with their handheld devices. For an additional charge, NetDocuments offers a local document service that allows firms to maintain an on-premises server with copies of their NetDocuments repositories.
Pricing is reasonable. The Professional service costs $30 per user per month with a three-user minimum for 3 GB of storage. Additional storage is $6.25 per GB per month.

Some things are not as intuitive or well executed as they could be. For example, while it is possible to customize one's home page, other Web applications offer drag-and drop capabilities and more flexibility. Customizing document attributes and the views on various screens is possible, but again, it is not as intuitive as it could be.

Overall though, NetDocuments looks like a very appealing online document management solution. The firm's long history of servicing law firms of all sizes is encouraging. Setting up and learning the system will require some patience, but once it is implemented, the application should be able to serve the needs of many advisory firms.

Redtail Imaging

Redtail Imaging was developed by Redtail Technology (http://www.redtailtechnology.com/), developer of the popular Redtail CRM, an online CRM application for financial service professionals. Redtail also offers Redtail e-mail archive and retention, an inexpensive e-mail solution for advisors.
Redtail offers many of the same features and functions as NetDocuments. Both allow you to outsource the maintenance of your document management hardware and software (with the exception of scanners) to a third party, but they each require the installation of various Microsoft components to operate effectively.  Each firm has secure, redundant server repositories located in different parts of the country. Both offer an online TWAIN scanning interface as well as a method of scanning to the local hard drive and then uploading documents in batches. A full audit trail is available from both platforms.

A cursory examination of Redtail and NetDocuments might lead one to believe that they are interchangeable, but closer examination reveals differences that might be significant to some. Redtail owns and manages its own data centers. NetDocuments does not. Redtail's East coast center is managed by LexisNexis, the one in the West is managed by federally regulated Commercial Bank.

Perhaps the defining feature of the Redtail platform is its simplicity. It does not offer all the advanced features that NetDocuments does, but keeping things simple makes it easy for novice users to master. The top-level Redtail folder structure is predefined and cannot be altered by the user. Each account gets a corporate library, a client library and an unfiled library. All client records go in the client library, documents that have been uploaded but not yet filed go to the unfiled library, and everything else presumably goes in the corporate library.

This structure may sound limiting, but it need not be since each library can have an unlimited number of subfolders. Although Redtail does not offer "workspaces" like NetDocuments does, when dealing with client files it is possible to achieve a similar effect by creating a client filing template with various subfolders, and then copying that folder structure so that each new client folder contains the same sub-folder structure. Still, Redtail does not offer the same flexibility as NetDocuments when it comes to organizing, displaying and sharing documents. NetDocuments also offers NetBinders, a quick and secure method for collaborating on a limited number of documents; Redtail does not.

Redtail offers integration with Redtail CRM. E-mail clients can take advantage of an integrated CRM, document management and e-mail platform. As a YourSilverBullet member, Redtail offers integration with Albridge, MoneyGuidePro and LaserApp. They also integrate with AssetBook. NetDocuments offers tight integration with SalesForce.com. NetDocuments offers retention policy features, but Redtail does not. If you retain all your documents indefinitely this is not an issue, but if you currently enforce retention policies, or plan to in the future, NetDocuments has the edge here.

Redtail's pricing is very simple: $49 per month per 10 GB of storage space. Unlike most competitors, there are no per user charges. Additional storage costs $4 per GB per month. Redtail told me that 10 GB is sufficient to store nearly one million pages, but this is just an estimate. Your results will depend on the file format, the resolution, use of color, embedded graphics etc.

After briefly trying both products, I have concluded that online document storage has advanced considerably over the last few years. Those looking for an inexpensive yet fully functional online document management system will be hard pressed to find a better deal than Redtail Imaging. Those in need of a more fully featured online system will find NetDocuments a good value for the money.