Financial Advisors

It's Already Too Late to Start Thinking About Going Paperless

By Michael Pinsker, Founder and Chairman of Docupace Technologies, Inc.

Recent analyses paint a picture of a largely stagnant U.S. wealth management industry — one that has been made complacent by a record-setting bull market, solid populations of baby-boomer clients, and the loosening of federal regulations.

Our own experience corroborates these claims: we frequently encounter firms who haven’t broached the subject of implementing digital operations simply because it hasn’t been necessary. These firms (many of which are independent broker-dealers and RIAs) are still having clients sign paper forms and processing transactions through the mail.

Meanwhile, the most successful firms are the ones who got started early on digital operations initiatives (whether due to good forecasting or regional regulations/market requirements). Now, they are moving on to higher levels of technological maturity. Winning firms continue to take advantage of the cloud, roll out client-facing mobile apps, and implement AI-driven analytics.

Simply put, by being ahead of the trend, they’re competing in a whole different league.

Firms that are still considering “going paperless” at some future date are already behind. The delta between industry leaders and those still waiting at the starting line is simply too great. For firms to stand a chance at surviving (let alone thriving), going paperless needs to start right now, today.

The Greatest Threat Is Time

While no one can predict market or regulatory changes with certainty, there’s one factor that’s guaranteed to threaten firms that still rely on manual processing: time.

Many baby boomers are already well into retirement. Meanwhile, millennials are poised to become the largest investor group over the next 15 years, and they demonstrate a strong preference for self-directed, automated, on-demand investment experiences — a preference that lean fintech startups have been more than happy to provide, at the expense of traditional advisory models.

The fact that advisors themselves are aging is also not helping matters. Only 11.7% of U.S. financial advisors are under age 35, a figure that’s likely symptomatic of the fact that young people don’t want to deal with paperwork as advisors any more than they do as investors.

Band-Aids Won’t Work

Some firms have tried to address this problem with band-aid digital solutions. While an online customer portal or chatbot might fool some investors into perceiving their advisors as being tech-focused, they cannot disguise a fundamental reliance on paper-based processes.

Processing account opening paperwork through fax and mail takes days (or weeks, in the case of NIGO submissions). Offering “transparency” into slow, inefficient processes will make the problem worse, not better.

The Cost of Not Going Digital

To some extent, the gap between industry leaders and those lagging has been falsely deflated by delayed returns. Many early adopters paid millions for customized digital operations solutions – which have required continual optimization. For firms that didn’t have the resources to create their own platforms, maintaining the status quo was (at least in the short-term) a competitive advantage. It didn’t cost anything to stay papered.

Now, however, firms with digital operations are reaping the rewards of their investments. Based on our data, it’s approximately three times cheaper to process a mutual fund account opening digitally than on paper, and the whole process can be completed in minutes instead of days. Digital operations also help firms reduce call volume, trim down the back office and recruit top advisors from competitors.

And while papered costs remain fixed, paperless operations continue to get cheaper. In the current landscape, each day a wealth management firm remains papered represents money and time lost.

A Silver Lining

If there’s some hope to be found in the situation –  paper-based firms actually have one advantage over early adopters of digital operations: it’s now more affordable than ever to implement a paperless office strategy. By waiting, firms have drastically decreased the cost of the project. However, if they wait much longer the opportunity will have passed them entirely.

Established third-party providers can now help wealth management firms implement relatively standardized digital operations software and processes quickly, and for a fraction of the cost of bespoke solutions. These software platforms are designed to be compliant with existing SEC and FINRA regulations, and because they’re hosted and maintained by a third party, the cost of updates, support and optimization does not fall solely on the customer.

There’s never been a better time to go paperless, just as there’s never been a worse time to stay papered. For those firms that have yet to drive technology to the core of their operations, it’s truly now or never.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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Michael Pinsker

Born and raised in the Ukraine, Mr. Pinsker immigrated to the United States in 1991 where he used his talent to earn a degree in Computer Science and Engineering from UCLA. Mr. Pinsker started his career in Information Technology ("IT") more than 25 years ago with, Datamax Technologies, an early software pioneer in an IT field labeled "Document Imaging and Workflow Management".  Michael remains even today the preeminent software expert in that field.  Subsequent to the work at Datamax, Mr. Pinsker spent additional time with both Unisys and Paramount Pictures broadening his understanding of how F-500 companies are organized while continuing to develop innovative software. These three prior business experiences prompted Michael to start a consulting company in 1997 that specialized in complex enterprise grade implementations of workflow and imaging systems for insurance companies and government agencies. In 2002 Mr. Pinsker founded Docupace Technologies with the goal of bringing a SaaS workflow and document management platform to the market.  As a founder CEO, Mr. Pinsker focused Docupace on the needs of Financial Services Industry and led the company through a significant growth period from 2002 to 2018, including successful completion of several financing transactions and a management buyout, until assuming the role of Chairman of the Board.  In addition to 16 years of experience in Financial Services, Mr. Pinsker enhanced his knowledge in cyber security and holds certifications from American Board of Certification in Homeland Security in Sensitive Security Information (SII/DHS), Certified Information Assurance (CIA/DHS) and Cyber Warfare (CW TTPs/DHS).

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