The business case for financial services firms to implement strong e-migration strategies for all client communications has never been stronger. In fact, Canada Post’s Dec. 11, 2013 announcement that it’s phasing out door-to-door delivery of regular mail to urban residents, while increasing the cost of an individual postage stamp to $1 from 63¢, only reinforces this fact. Although mail and other paper-based communications will not disappear any time soon, the case for the use of electronic channels is now overwhelming.

The cost savings opportunity is enormous. Although there are many other reasons to leverage digital channels — not the least of which are the environmental benefits and consumer preference — nothing affects the bottom line in a clearer, more direct way than the cost of a postage stamp multiplied by the number of pieces of mail that a firm can avoid sending out. Just add up all the trade confirmations, statements, annual reports, prospectuses and tax documents that your firm sends out over a year and multiply the total by the cost of a stamp. There isn’t a management team in the world that wouldn’t like to deliver that amount in annual compliance cost reductions.

Although adoption rates still hover around 10% for financial services firms moving to paperless communication, an integrated marketing effort and a catalyst such as Canada Post’s latest announcement can drive adoption up to 40%-50%. New and increasing regulation is also a key driver for e-delivery. When amendments were made to National Instrument 31-103 in 2012 that required mutual fund dealers to start delivering client statements once every three months from once a year, many dealers saw this as an opportunity to avoid quadrupling their print and mailing costs by migrating their clients to e-statements instead.

As my firm InvestorPOS Inc. pointed out in a recent white paper entitled Fund Facts Delivery: POS Stage 2 Strategies for Success, the introduction of the new Fund Facts document is another catalyst for e-migration. For those dealers relying on their advisors to deliver Fund Facts to investors, e-delivery of Fund Facts will improve advisor productivity, eliminate compliance delivery gaps and provide investors with better information faster. Where dealers have back-office compliance processes that are transaction-driven and combine the mutual fund trade confirmation with a prospectus/Fund Facts in an integrated package, e-delivery of Fund Facts with the trade confirm will also result in significant cost savings.

More and more regulation is being rewritten to leverage today’s technological landscape, resulting in tremendous momentum toward electronic communication in financial services. National Policy 11-201, Electronic Delivery of Documents, which was first drafted in 2000 and then updated in 2011 to become less prescriptive and to acknowledge new forms of digital media, has eliminated many barriers to e-delivery. Financial services firms have only to satisfy its four components in order to show good delivery:

  1. Notice of Delivery. The intended recipient of the document should have notice that the document will be made available electronically.
  2. Access. The intended recipient of the document should have easy access to the document.
  3. Evidence of Delivery. The deliverer should obtain evidence that the document has been delivered to the recipient.
  4. Delivery of an Unaltered Document. The deliverer should ensure that no alteration of the document occurs during the delivery process.

With the growth of telephone sales and online investors who do not meet face-to-face withan advisor, the reliance on electronic channels for timely document delivery has become even more necessary than ever before. These online investors arenot just those in the discount channels, but also the virtual investors who have an employer group retirement savings plans or deferred profit-sharing plan and typically have no financial advice pre- or post-sale. This investor segment represents a significant portion of mutual fund purchases and yet is typically quite underserviced or provided with proper investment information only well after the fact.

Given the media’s and regulators’ focus on compliance, transparency and suitability of investment products for retail clients, the trend toward increasing disclosure regulation will only grow. Organizations intent on maintaining compliance best practices without suffering similar profit challenges to Canada Post’s due to an overdependence on print communications would be well advised to focus their energies on electronic channels.