Client Document Management – A Risky Concern for Investment Advisors

by | Last updated Dec 27, 2023 | Published on Feb 15, 2019 | Document Conversion / Scanning Services

Financial advisory is a highly regulated industry that requires accurate and clear documentation. Investment advisors are people or firms that get paid to give advice about investing in securities. Investment advisory as well as wealth management firms manage huge volumes of paper, including client financial statements, trade confirmations, tax forms, and wealth management documents daily. The active management of these paper-based accounts is time- and labor-intensive. Paper documents related to thousands of clients are stored in filing rooms in traditional filing cabinets and the process of finding, retrieving, updating and storing paper documents can consume valuable time. As a document scanning company with years of experience in the industry, we are providing businesses with document management solutions to maintain a paper-free office. Electronic document management is much more relevant now with wealth management companies collecting more data about clients than ever before, intending to transform how advisors serve clients. Data security is a major concern today and companies have to take proactive measures to protect customer data.

Client Document Management

Latest Case

A recent case of data leakage reported is that of BlackRock, the world’s largest asset manager. The company had accidentally posted information of thousands of its advisor clients on its iShares ETF website. The three spreadsheets that were compromised reportedly included the names, email addresses, and iShares assets of thousands of advisors, as well as labels such as “dabbler” and “power user.” The sheets were dated December 5, 2018 and each sheet reportedly contained 12,000 entries.

With such a massive data leak, there are concerns about how well financial services firms are securing sensitive data. A Registered Investment Advisor (RIA) is responsible for securing client data to avoid any such breaches that come with crippling consequences. According to Financial Planning, the actual problem for BlackRock began when an employee tried to post sales-related information to an internal CRM-related system and posted it on instead.

SEC Alert on Data Security for Advisors

The U.S. Securities and Exchange Commission (SEC) recently released a risk alert that notifies advisors to pay closer attention while handling their clients’ sensitive information. With this risk alert program, the Office of Compliance Inspections and Examinations (OCIE) encourages advisers to review their risks, practices, policies, and procedures regarding electronic messaging and consider any improvements to their compliance programs that would help them comply with their regulatory requirements. Advisers are also encouraged to stay abreast of evolving technology to meet their regulatory requirements.

The SEC has also prioritized cyber security during adviser examinations with an emphasis on governance and risk assessment, access rights and controls, data loss prevention as well as training and incident response.

Effective Document Management System Helps

Implementing a document management system can help wealth management businesses to

  • reduce costs
  • gain greater control over the huge volume of paper in the office
  • improve services by quickly accessing account information
  • immediately retrieve documents
  • increase the operating efficiency of the business
  • protect critical information from loss due to accidents, theft or misplacement

With electronic files, you can see which staff members have accessed files, thus preventing employees stealing confidential data. If something does go wrong, you’ll be able to take action quickly. You can also request reasons for printing or emailing client data.

With reliable document management solutions, you can remain compliant with SEC regulations and FINRA (Financial Industry Regulatory Authority) standards, which mandate that the data must be held securely for years.

Scanning and Cloud Storing Client Documents

Document scanning services for client files help financial advisors to become more efficient in their operations and meet complex challenges. Along with obtaining quick access to client data, cloud storage of scanned client information also save data from natural disasters. It is critical for investment advisors to train their staff on important cyber security steps, identifying phishing emails and steps to verify the movement of client funds.

Financial advisors should focus on certain data security practices such as the following.

  • Clearly understand the type of data their firm retains, its location and how it is controlled
  • While outsourcing document management tasks, learn more about the partner firm’s data security policies
  • Read well the contracts and agreements between your firm and providers that have access to your data
  • Have clear policies and procedures for your staff to follow

AI (Artificial Intelligence) Revolution

According to a Forbes article, the role of a financial adviser can be replaced by artificial intelligence, as AI tools can easily digest all financial historical data, determine historic trends, and access each and every source of information to have an up-to-date understanding of the markets. Even with the availability of such advanced technologies, most businesses prefer manual record keeping and document conversion solutions, as highly skilled professionals at reliable outsourcing firms can work for any wealth management practice.

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