Next month, the Securities and Exchange Commission will begin requiring that advisors have a business continuity or disaster recovery plan in place. Quite a few broker/dealers and electronic document management firms are helping advisors comply by offering them new Web-based imaging services that provide virtual file cabinets so they can not only store years of data but also speed their workflow.
Web-based imaging is a huge development for advisors because it not only virtualizes their offices–allowing them to work from anywhere at any time–but it also provides the basis for a disaster recovery plan that many advisors may have desperately needed but weren’t quite sure how to develop on their own.
Cambridge Investment Research and Commonwealth Financial Network are two independent broker/dealers that are now beta testing Web-based imaging solutions with their advisors. Commonwealth has offered its reps a desktop imaging solution for the past three years, which it developed with Laserfiche. But the new Web-based system moves advisors into the 21st century because they “need nothing but a browser to essentially manage their entire office and create a virtual office,” says Darren Tedesco, director of business systems at Commonwealth. “Your filing cabinets go with you wherever you are–an airport kiosk, your office, your house, your client’s office.”
Imaging does more than just provide advisors with the ability to create an essentially paperless office, Tedesco says. Sure, it’s great to scan all of your documents and move them into an electronic format, but the real value that imaging provides is “when you’re starting to im-prove your proc-esses and workflow so you’re spending less time doing work,” he says. “You can get to your documents quicker, and make sure from a compliance standpoint your bases are covered.” He adds: “The value isn’t the day-to-day paperwork that you’re looking through, it’s the peace of mind of knowing that it’s there and knowing you’re compliant, you don’t have to worry about backups.”
Cutting Out the Middleman
Cambridge’s and Commonwealth’s imaging solutions are also cutting edge because they not only allow advisors to scan documents that are relevant to the broker/dealer, like new account forms that advisors would normally send to the B/D in hard copy, but also because the advisor can create an electronic filing system for his documents. “Besides having imaging here in the home office, our system provides the reps a full imaging capacity in their office,” says Eric Schwartz, Cambridge’s president and CEO. For instance, the advisor could take 25 years worth of clients’ financial planning documents–tax returns, trust documents, and personal notes–and create an electronic filing system to store them in. This type of imaging service is sorely needed, says Jo Day, president of Trumpet, Inc., a firm based in Phoenix that provides electronic document management for financial services firms, because one of the biggest complaints she hears from reps is that their B/D’s imaging service focuses solely on how the reps can more readily get paperwork to the B/D. Most of the imaging systems out there are “meeting a piece of [reps'] needs, but not all,” she says.
What’s more, Cambridge’s and Commonwealth’s imaging systems also link the advisor to the clearing firms and fund companies to facilitate quicker processing of trades. For instance, say an advisor scans an electronic image of a direct account application for American Funds, Tedesco says. Today, the advisor is sending that direct application to Commonwealth to be approved, and then it goes to American Funds, he says. The new imaging solution allows the advisor to scan the paperwork, Commonwealth “annotates” the paperwork, and then the advisor is free to send it directly to American Funds, “which basically cuts out the middleman and gets the money invested quicker.” Ryan Reineke, a VP at Cambridge, adds that while Cambridge’s imaging system, called C-Doc, “facilitates getting documents from one place to another, the end goal is to link up online trade approvals and soup-to-nuts transfer documents from the rep’s office all the way to the clearing firm or third-party partners.”
Reineke says Cambridge has designed its imaging system so that, depending on which type of document the advisor scans in, the system automatically knows where to route the document–to Cambridge’s compliance department or to one of its clearing firms, say, Fidelity’s National Financial–and it can be routed to multiple places at once. “We built the system so that it routes documents to various people to work on at the same time,” says Schwartz. Cambridge’s system is now linked with National Financial, and the B/D is beta testing its imaging system with Pershing. Schwartz hopes to link with Schwab’s imaging system, as a lot of Cambridge’s advisors custody assets at Schwab, as well as some of the larger fund companies and annuity companies.
Cambridge’s imaging system is also great because the rep can monitor workflow, Schwartz says. For instance, if a rep wants to ensure that Cambridge’s home office received a document, “the rep can just go into the system and see exactly whose desk it’s sitting on and where it is in the process,” he says, rather than calling. “We can track the process here [at the home office] and know exactly where the bottlenecks are, and so can the rep.”
Cambridge developed some of its imaging technology in-house, and also partnered with a firm called KnowledgeLake in St. Louis, which specializes in workflow and imaging technology. Commonwealth, too, developed some technology in-house, and partnered with a firm called
Mobius. However, Tedesco says because Commonwealth integrates Mobius’s technology with a pair of its own applications–Community Link, which is Commonwealth’s main portal, and Client 360, the platform where advisors manage client assets–”we don’t even tell reps what tech firm we’re using.”
Day of Trumpet says her firm integrates its document management software with advisors’ contact management software–an offering that she says is unique. “A lot of advisors use different flavors of contact management software–like Junxure, ProTracker, and so on,” she says, so they want to know if the imaging software will integrate with whatever system they are using. It’s important from a workflow perspective, she says, because with larger firms, “you’re going to have people who are not techies, and they just need to be able to hit a button and bring up whatever they are looking for.”
Because a number of its reps were either starting to use imaging or were thinking about it, Cambridge decided to develop an imaging service that would be better and cheaper “than what they could get if they bought a system and installed it themselves,” Schwartz says. A handful of Cambridge’s rep offices were using Laserfiche’s electronic file cabinet and workflow service, however, the downside to the system is that it doesn’t connect with Cambridge’s home office or with other firms like National Financial, Schwartz says. Laserfiche charged advisors anywhere from $10,000 to $30,000 for the initial set up, and then a monthly maintenance fee of $200 to $300, Schwartz says. Elena Bosio, a Laserfiche spokesperson, confirmed that those figures are accurate. Cambridge charges the rep “nothing up front,” he says, and then levies a $320 monthly fee per branch. “That’s per branch, not per rep. You can have a branch with 60 reps or a one-man shop.” Advisors then must buy a scanner, which on the high end would cost $1,500, Schwartz says. “Our software will plug into 99% of the scanners on the market,” adds Reineke.
Reps can retrieve any document submitted from any Web browser if they have a log-in to Cambridge’s Web site, says Reineke. Advisors submit the documents through another piece of software that Cambridge provides them that’s configured to work with the scanners in their office. “Say an advisor has a client meeting and he is at the client’s house, he can just log on to Cambridge’s Web site and retrieve the documents.”
Right now, 21 of Cambridge’s offices are either “fully using the system or are in training,” with another 30 offices considering signing up. Commonwealth has yet to figure out pricing for its imaging service, and hopes to make it available to reps by early fourth quarter. The next step for Commonwealth’s new imaging system is writing up a policy on shredding documents, Tedesco says. About 30 of its advisor offices are now shredding documents under its old desktop imaging system, but Commonwealth must draw up a policy that adheres to SEC standards on shredding documents for its new Web-based system. Day of Trumpet says that some B/Ds tell reps “they can scan all they want, but they can’t shred” documents. This is “disappointing” to reps because sometimes reps move from a B/D where they’ve been “electronic for some years and the B/D asks for paper files,” she says. “For existing reps, some B/Ds say you have to keep [files] on paper, and that’s not going over real well with some reps.” Schwartz says Cambridge allows shredding, noting that the B/D recommends keeping new account forms, “but everything else can be destroyed.”
Tedesco says that Commonwealth guarantees, in writing, that the B/D will provide all of an advisor’s images to them if they choose to leave Commonwealth. The B/D is also creating a solution called DVDs on Demand, which allows the advisor to store all of the client’s personal data on a DVD. The service is a value-add, because advisors “will be taking care of all of their [clients'] personal documents they have at home.” Advisors can boast that their imaging system is SEC approved and that the system is backed up, so there’s no need to worry about losing documents, Tedesco says.
Advisors’ growing compliance burden almost demands that they adopt an imaging system. If you’re an advisor who isn’t scanning documents, maybe it’s time to see what your B/D or an independent firm has to offer.
Washington Bureau Chief Melanie Waddell can be reached at firstname.lastname@example.org.