Even in this digital age, financial advisors are drowning in paperwork, said Linda Ding, director of strategic marketing for Laserfiche, a company that provides digital services for RIAs.
Continuing to use paper costs advisors time and money and can hurt the sale value of a firm, Ding said in an interview last week at the BNY Mellon, Pershing Insite18 conference in Orlando.
“The practice management side of the RIA business is still labor intensive,” she said. “It can take months to onboard new clients using paper documents. A financial advisor can lose a client if it takes too long to get the documents in place. Using digital records can reduce that process to a half hour.
“If a firm has to retain and store documents, the firm members may be unsure who has the documents at any given moment or the documents could be lost or damaged in a natural disaster,” she added. Ding said one company she is familiar with paid $30,000 to have its documents freeze dried to recover them after a flood.
Some advisory firms are not adopting a completely digital system because of inertia and the paperwork system seems to be working.
A digital system can limit who has access to documents and keeps track of who has accessed the forms in real time, Ding said.
“There is a misconception about how digital systems work” and a fear that the files could be lost in the cloud, she said. A digital system is “vastly superior to dumping things in a physical file,” she said. “Nothing can fall through the cracks when the system for documentation is automated end to end.”
Having a sophisticated back office set up in place that meets all compliance requirements also raises the price of a business when the firm leader is ready to exit, Ding noted.