Advisers’ paper footprint stubbornly high despite digitisation

Paper use has increased dramatically since the implementation of Mifid


Experts are blaming regulatory pressure for the staggeringly high amount of paper being used by advisers and platforms, despite an increase in technology across the industry.

A recent survey by Fundsnetwork with Nextwealth asked advisers about their top business challenges, with 80% stating it was compliance and regulatory change, followed by a third who said it was back office administration and business efficiency.

At the Morningstar conference earlier this month, Heather Hopkins, managing director of Nextwealth, discussed how this increase in regulatory pressure has increased the use of paper by platforms and advisers.

“This is a real frustration for a lot of adviser businesses, there is still a lot of paper for compliance,” she says.

“The number one business challenge for advisers is not finding new clients, it’s not supporting them in getting a sustainable retirement income, it’s about meeting the compliance burden and keeping up the regulatory change.

“Revenues have gone up but profits haven’t for a lot of businesses.”

Regulation forces paper usage

Hopkins alluded to the survey which also asked platforms about their ability to do paperless processes. It found that James Hay was the only one that doesn’t require a wet signature.

“The rest will say that 95% of our processes could be paperless but if you want to direct debit for an ongoing investment, you need to send us the paper form,” she says. “They are trying to do it, but it’s hard for them.”

Portfolio Adviser reached out to AJ Bell, one of the platforms which still has paper processes, to understand where it is most paper-heavy. The platform provider blamed the industry, stating financial services is a heavily regulated industry which forces the creation of processes and requirements that “necessitate the use of paper”.

An AJ Bell spokesperson says: “The use of paper is gradually on the decline and we have a number of initiatives that are designed to continue that trend over the coming years.”

But, the amount of paper depends on the type of business that is being written, they explain. For example, a relatively simple Isa or Sipp invested in mainstream funds can be transacted almost entirely online but if there is a commercial property or off panel investments held within a Sipp there can be a considerable amount of paperwork required. Transfers are also an area that can be paper heavy with many providers still requiring wet signatures.

“The personalised service that advisers offer to customers via home visits also means that paper applications are still common place,” the spokesperson adds.

However, Darren Cooke, financial planner at Red Circle Financial Planning, says he is using less paper when delivering advice and documentation to clients and only a few clients insist on having paper versions.

“Sadly, many providers still are very poor at being paperless. My main platform of choice updated last year, and they have decreased the amount of paper significantly, but I recently used a different one – Transact – and the amount of forms required to open an account was staggering.”

Likewise, Martin Bamford, managing director at Informed Choice, says his firm is pushing as much paperwork as possible into PDF versions that can be accessed securely online, “but there is still too much reliance on paper”.

“We’ve always been a profession reliant on paperwork, but the volume appears to have increased dramatically in recent years, particularly since the implementation of Mifid.”

Paperless is just a trend

But Tom Kean, director at Thameside Financial Planning, is yet to be convinced that some firms might “really prefer paperless”.

Kean explains that Thameside regularly get deliveries of “reams of paper” and must be getting through “proportionately loads” but he doesn’t specifically look at the cost of using paper as a single item of expenditure because “it is what it is”.

“We are still actively paper based as it suits my style of working,” he says.

“It strikes me that it is perhaps a bit trendy to be digital and some might view us as Luddites. That doesn’t bother me because I’ve heard enough people saying that it’s not so great being digital.”

He continues: “Ultimately, I like the tactile nature of flipping through a file to try and find what I’m after – no digital system has convinced me otherwise, nor are they as reliable, I gather. I even reconcile this with a more movement-filled day, forcing us to get off our backsides on a regular basis rather than being hunched over a computer.

“Each time we have formal file reviews with our external compliance consultants, I make a point of asking which they prefer. Every single one, so far, prefers paper. So, for the foreseeable future we will remain paper based.”

But, Bamford explains that an increased usage of paper processes has a cost attached to it. Last year, Bamford Media spent more than £15,000 on stationery including paper and postage costs, and a further £10,000 on printing. “This of course ignores the environmental impact of the paper, ink and energy required,” he says.

The firm is currently ordering a couple of large boxes of copy paper each month from its stationery suppliers, as well as several thousand pages of headed paper and continuation paper for printers. “On a monthly basis, we send off 20-30 boxes of paper to be securely shredded, once files have been scanned,” he says.

“Digitising more of our processes would have a big positive impact on the quantity of paper we use, and associated costs like printer consumables and postage. We’re in the process of implementing Virtual Cabinet, which should dramatically reduce our paper consumption, allowing us to add letters and reports to a secure online client document vault.”

A long way to go

Meanwhile, Hopkins says: “It seems most of the platforms require signatures and if they don’t have that safe harbour to know that other compliance departments have said that it’s OK, they feel it’s too risky to take that on.”

But Cooke argues that while advisers and platforms are attempting to reduce the paper processes, there is still a long way to go with many.

“The biggest problem though is the amount of paper providers send out to us and clients, reams of it, mostly unread,” he says. “They generally have electronic means of communicating with clients and they certainly do for me and should look to deliver more that way.

“My biggest cost right now is time taken with all the post we receive scanning it in and shredding it, if it came electronically it would be much simpler to download and then save to the client’s electronic file.

“It is getting better but far too slowly given what tech can easily enable now.”

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