7 ways to correct advisers' biggest technology and compliance blunders

From improperly storing client data to misusing document management systems, here are the top mistakes technology experts see advisers making

May 15, 2014 @ 9:59 am

Using technology that is up-to-date and compliant should be a top priority for financial advisers, but well-intended mistakes still happen. Here, experts weigh in on the blunders they most often see advisers make and how to correct them.

Store data in secure places

“Advisers save client data in nonsecure places! Examples include hard copies in their offices or on the server in their offices — both of which have risk of theft or fire and the local IT shop that manages the server could have trouble accessing the data. Other don'ts include using a less than secure cloud storage service (some popular services are not SEC-level secure), or using a secure cloud storage service but not securing it (leaving it open on an iPad, not using a strong password and not changing passwords frequently). Also, e-mail isn't a secure means of sharing data, even if the attachment is password protected. Using secure file vaulting technology is safer."

- David J. O'Brien, financial adviser, O'Brien Financial Planning, Inc.

Have a secure document management system

“One of the biggest oversights that advisers make when it comes to technology and compliance is relying on Adobe Acrobat as their document management system. While a pretty flexible tool, Adobe PDF documents are not a compliant system. Oftentimes, we see advisers scanning documents into their Windows operating system folders and assuming this is a good idea. There are many issues with this approach, not withstanding the terrible operational inefficiencies this causes, because ultimately it is not a secure repository. Anyone who has access to the network can delete files, overwrite them, fax them, e-mail them and relabel them.”

“A true document management system will have granular security to each document and an automated audit trail that documents who accessed the system, when they accessed it and what they did to the documents. When the auditors come knocking and they ask the tough questions about information security, you don't want to be the adviser whose only answer is the unprotected shared network drive.”

- Timothy D. Welsh, president, Nexus Strategy LLC

Use systems to their fullest potential

“The biggest blunder advisers make in the area of technology and compliance is not using their most significant systems (in this area it is their CRM, document management, and portfolio management systems) to their potential so that they can produce material, data and information quickly and efficiently in the event of an audit or lawsuit. Remember, compliance isn't just about the SEC and Finra — it is also to protect you from disgruntled clients.”

“Check with your vendors for specific advice/training on compliance help for the various systems. Virtually every vendor I know provides this specific training and education.”

- Gregory H. Friedman, CEO and president, Private Ocean

Keep up with the latest advancements

"Too many advisers are a little too comfortable with their existing technology. They know how to use it. There's nothing new to learn. Their clients like the reports it produces; or so they think."

"Wrong! Technology is advancing rapidly. If you are not moving ahead with your technology, you are falling behind. Your competitors continue to innovate. If you do not, you will lose existing clients and fail to acquire new ones."

"Advisers often tell me that their clients love their reports, or their websites, or something else they provide. How do they know? Do they survey their clients? Do they show them some alternatives that may be superior? Or do they wait until a client's friend demonstrates how his adviser provides superior service through superior technology?"

"The bottom line is that advisers must be proactive. They need to regularly re-evaluate their technology as well as the technology training they provide to their staff. Every firm should assign at least one staff member to benchmark the firm's technology and technology training regularly in order to ensure that you are keeping abreast with the best industry technology practices."

- Joel P. Bruckenstein, consultant, publisher of Technology Tools for Today

Use a proper archiving tool or website design

“First, many advisers have fallen down the slippery slope of using text messages to communicate with clients without first setting up a tool to archive all of the text messages. Texts must be treated just like e-mail correspondence. Text messages need to be captured and archived in a compliant storage system, just as advisers currently do with e-mails.”

“Second, I see many advisers who choose website designers that aren't familiar with the financial services industry's compliance requirements. While their new website is very modern and visually appealing, advisers are not capturing and archiving the new website's content as required by regulatory requirements.”

- Bill Winterberg, founder, FPPad.com

Understand social media's reach

“Some financial advisers post on social media sites and don't fully understand the reach. Once information is put out in the various social media outlets, it is there for the world to see. Therefore, advisers should be reminded to get approval from their compliance department prior to posting business information on social media sites.”

- John Haerle, senior compliance specialist, RBC Wealth Management-U.S.

Get a large enough bandwidth

“One area that we consistently see advisers not paying attention to or trying to save money on is with their office's Internet bandwidth — both for download and upload speeds. For a large office, improving download speed by 10 MB per second can translate into $5,000 to over $10,000 of bottom line productivity savings a year, not to mention a better web experience for this employees. For offices that upload documents to cloud-based software on a daily basis, having advisers or assistants staring at the upload transfer screen regularly also is a huge time and money waster. As a general rule of thumb, we recommend that for each person in an office, there is at least 3 MB per second in download speed and that upload speeds should be at least 1 MB per second, preferably even more.”

- Darren Tedesco, managing principal, innovation and strategy, Commonwealth Financial Network


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