From the February 2016 issue of Investment Advisor • Subscribe!

What You Need to Know About E-Signatures

Implementing e-signature technology is not as straightforward as it seems

Moving client signatures from paper to iPads has more hurdles than advisors may imagine. Moving client signatures from paper to iPads has more hurdles than advisors may imagine.

In many respects, the successful adoption of electronic signatures (e-signature) by advisors has more hurdles than any other technology now commonly used. A number of firms have had great success with e-signatures, others have tried and given up, and some haven't even considered it.

E-signatures are a time-saving technology that continues to make great strides. The challenge is often not the technology itself, but understanding where to begin. I hear this specific question all the time. The answer, however, is not “one size fits all.” It's important that advisors address several key considerations before they implement e-signature technology.

If your first response to e-signature technology is “been there, done that,” well, it is time to recognize that advancements have been made. For example, each new mobile or tablet device improvement (faster processors, bigger screens, etc.) makes it easier for your clients to sign a document electronically. Furthermore, providers have made the process of signing documents more streamlined and intuitive than it was several years ago.

It is also important to recognize that clients are probably becoming more familiar with e-signature technology, too. They have likely already used it in various situations: retail, financial, health care and other industries.

One of the first challenges is deciding which provider is best for your firm. Sometimes this decision will be made for you based on the rules of your broker-dealer or custodian. If not, a critical best practice is to try out multiple providers. A number of providers like Docusign, Right Signature, Adobe and others offer a low cost to try their solutions. Too often, people select a provider without running the technology and the process through its paces. Don't rush it. Try working with a few of your favorite clients to help beta test the e-signature solution.

As part of the selection process, take time to review not only the features but also the agreement of what the e-signature provider will and will not do. What do you agree to do as the user? For example, the user often decides what information is required to authenticate the signer. This could be a variety of identifiers, ranging from the client's email address or having their own pin number to answering a number of personally identifiable questions. There are a number of possible authentication methods for your firm to consider, but keep in mind any requirements in this area with your business partners (third-party asset managers, custodians, insurance companies, etc.).

Once you are ready to officially use e-signature technology for your firm, review your current written supervisory procedures and business process guidelines. Some questions to consider include: Can every document you use be e-signed? Is every employee authorized to use the e-signature technology? Is there a different review and approval process for documents authorized with e-signature technology? You should also include how you will store and retain the information obtained in the e-signature process. These are legal documents; therefore, you want to ensure you are clear about your procedures, retention and approval process.

One of the great benefits of e-signature technology is the visibility offered during the entire signing process. You always know the current status of the document: who has viewed it, signed it and completed their requested actions. Furthermore, once a document is fully electronically signed by all parties, it will be “certified” with an audit trail showing the entire life cycle of the signing process. At this point, no changes can be made to the document without breaking the certification status. This is a critical point to understand and is part of the legal enforceability of e-signed documents. This can also lead to a fair amount of frustration if you have to re-do the signing process because of errors or changes to the initial document, so make sure the document is in good order prior to any e-signature being recorded.

No doubt about it, e-signature technology offers great opportunities and efficiency gains for advisors. It is not as simple as just replacing pen and paper with a finger and touchscreen — but it is not that hard either. Ensuring that your firm starts with the right provider and the right process will definitely lead to early success with the technology.

Not All or Nothing

I have heard it hundreds of times: A firm aspires to use e-signature technology for all its documents. Unfortunately, it really isn’t realistic. The fact of the matter is there is too much variability with documents, differing levels of clients’ ability and other factors that will influence your firm’s overall adoption success with e-signature technology. Start with a modest goal and adjust it as you gain experience.

--- Read "Tech Tools to Help You Better Know, and Serve, Your Clients" on ThinkAdvisor.

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