Making sense of document storage confusion

Advisers are confused and un-certain about web-based document storage and document vaults.

Ideally, these solutions provide an adviser with a relatively low-cost, secure online location to upload client reports and other documents, replacing traditional mail or shipping and delivery services for the exchange of paper documents.

A good document storage system can offer convenience by allowing advisers and clients to share documents securely over the Internet, no matter where they are. For a firm with several offices or satellites, the systems also provide a convenient and cost-saving alternative to setting up and maintaining a virtual private network or file transport protocol server.

The problem with these services is that most are not designed specifically for financial services firms and don’t always meet the compliance and regulatory needs of brokers and advisers. Stint on due diligence and choose the wrong system, and you could run afoul of the law.

Take the issue of data security.

Advisers must be sure that document management solutions take adequate steps to ensure the protection of client data.

Before considering any solution, advisers should ask the provider if its system will help them meet Regulation S-P, which covers client privacy and protection of personal data; SEC Rules 17a-4(f)(2)(ii), 31a-2 and 204-2, which pertain to requirements for retention of books and records for investment advisers; and SEC Rule 17a, which covers the same area for broker-dealers.

In addition, privacy laws in Nevada and Massachusetts require the encryption of electronically stored or transmitted personal data (see links in the online version of this story for more-detailed information on these).

Once data security issues are checked, look into collaboration features. Some systems offer more than others, including document versioning and tracking, which allow you to see who has opened and worked on a file, and when. Others offer access to files offline, as well as specific downloadable applications that keep files synchronized.

Several third-party services provide secure online storage as their key offering. These include Box.net Inc. (box.net), Dropbox (dropbox.com), Egnyte Inc. (egnyte.com) and Netdocuments from NetVoyage Corp. (netdocuments.com), all of which seem to meet an adviser’s needs.

While there are free versions available for both Box.net and Dropbox, they provide little storage capacity (two and five gigabytes, respectively) and are lacking in many management features.

I would recommend trying out the free versions only for personal use to get a sense of how they work. You should also spend a few minutes reading the fine print, which explains your ownership rights, how public or private the files are kept (for example all use SSL encryption when connecting to the sites, and files themselves are encrypted at rest but can be shared by using a URL).

The services mentioned above price things differently, with some offering discounts to those buying a year’s service upfront and some offering deals through other pro-viders. Expect to spend about $20 per month per user.

Advisers using two of the more basic services — Egnyte and Netdocuments — said they are satisfied. Egnyte told me that more than 1,000 “financial service professionals” use its services; Netdocuments has been around for more than a decade and is heavily used by attorneys.

Advisers considering purchasing or using a more feature-rich service should consider the following:

AdvisorVault is a service from Advisor Products (advisorproducts .com), which provides and hosts websites for almost 2,000 advisory firms around the country.

It gives the user the ability to drag and drop files into a client’s folders on AdvisorVault, a timesaver when compared with the previous method of using a step-by-step wizard for uploading and moving files. It can cost an adviser anywhere from a one-time setup fee of $300 for 2GB of storage, if he or she is already hosting a website with the company, to $2,000 per year for 10GB of storage as a stand-alone product (plus the $300 one-time setup fee).

[Reporter’s note: I heard from Andrew Gluck, president and chief executive of Advisor Products after this was published letting me know he thought the reference to the AdvisorVault product needed some clarification, so I’m sharing what he had to say here.

“I appreciate the coverage. Thanks. But the way you quoted the pricing made the product look much more expensive than it is. No advisory firm we work with is using 10GB of storage, and 600 or 700 are using the system.

For $1000 a year, you get 2GB with a standalone vault. That’s good for thousands of documents. A handful of firms need more than that.

For $2100, you get 2GB plus a marketing website with our content management system, archiving, and all of our content.

We’re rolling out the Desktop Connector and that will differentiate us from all of the adviser-focused vaults. We’re already different from the consumer vaults you mentioned because of the interfaces with adviser applications, which port over data from portfolio management systems and planning applications into the vault.”]

eFileCabinet Inc., a content management provider that includes document management, offers Secure-Drawer. Its basic package of 2GB of storage, accessible by two administrator users and up to 100 clients, costs $9.99 per month; the premium offering, with 16GB of storage, 15 administrator users and the added ability to set up groups and shared “drawers,” is $79.99 per month.

CRM Software Inc., makers of the Junxure customer relationship management software, offers ClientView Live, which costs $2,495 a year for unlimited storage (junxure.com).

eMoney Advisor (emoneyadvisor .com), a financial planning software vendor, offers a document vault that integrates with Redtail Technologies’ popular CRM product. Cost and storage vary depending on the version of eMoney purchased and storage needs.

To avoid confusion when choosing a web-based document storage and document vault, therefore, read the fine print and ask about the regulations that affect your business model. If you get a long pause, a blank stare or double talk in response, just walk away.

E-mail Davis D. Janowski at [email protected].

Related Topics: Compliance, Document Management, Tech Directory, Technology Update