Take records into the digital world

“There is more and more compliance oversight all the time,” says Brownell. “People need a system to manage this.”

As regulatory oversight in the life insurance business continues to expand and evolve, insurance advisors are being urged to maintain detailed and comprehensive client files. And you must retain those documents for as long as possible. Those files are crucial to protect your practice in the event of litigation.

Many advisors rely on traditional paper-based filing to meet their record-keeping requirements. However, electronic documents have become a widely accepted – and, in some cases, preferred – method of retaining files.

“Lots of advisors have a real challenge around paper-based processes,” Brownell says. “They have filing cabinets full of paper, and it’s hard to find [documents].”

Keeping files in an electronic format reduces the amount of physical storage space required, which can reduce overhead costs. Electronic record-keeping also is very affordable.

“Disk space is cheap,” says Robbert McIntosh, director with Advocis Broker Services Inc. in Toronto.

From a legal standpoint, electronic versions constitute sufficient business records for most types of documents, according to Harold Geller, associate with McBride Bond Christian LLP in Ottawa. The exceptions, he adds, are powers of attorney, wills, trust deeds and other documents that are prepared by lawyers, which need to be retained in a paper-based form.

For all of your other documents, taking an electronic approach can have many advantages. For example, electronic record-keeping can create a much more efficient process for finding the information you’re looking for – you can do a digital search for a document rather than sifting through drawers full of paper files.

“The ability to retrieve information quickly and have it accessible is critical,” Brownell says. “A document-management system will allow you to search, retrieve and retain documents easily. You can pull that information at the touch of a keyboard.”

Electronic files also can be more easily shared than paper files, which can be helpful when a client requests a copy of a document or when your firm’s compliance department requires access to your files.

“Electronic information is easily shared, it’s easily audited and it’s easily ‘interrogated’ to get what you need from it,” says Simon Tomlinson, CEO of Toronto-based BlueSun Inc., the software-development firm behind WealthServ software.

Keeping your files in a digital format also can help you stay on top of your book of business and manage your client relationships, says Ray Adamson, chief customer officer with BlueSun. For example, he says, when all of your client information is kept in one system, you can use data-mining tools to analyze your files and identify sales opportunities within your client base.

“The ability of electronic records to help drive more proactive activity is a plus – for the client experience and also for the advisor to be more on top of what they need to be doing at the appropriate time,” Adamson says. “You couldn’t do that with paper as easily as you can on the electronic side.”

For advisors who are accustomed to a paper-based filing system they’ve had in place for many years, Adamson says, the prospect of shifting to a digital system can be daunting: “To go electronic, it is a bit of a change in how they’re approaching business, and what their process is.”

Given the efficiencies associated with an electronic platform, however, Adamson encourages advisors to embrace the electronic approach, even if they are starting to think about exiting their business. From a succession-planning perspective, Adamson adds, prospective buyers might be wary of acquiring a practice with an antiquated filing system: “That might affect what I’d be willing to pay for that practice.”

A digital database of detailed client information, he adds, could add value to your practice.

It’s important to consider the security risks associated with keeping electronic documents, especially given the sensitive nature of information that you have on file.

“Advisors collect a huge amount of personal data about their clients,” McIntosh says. “[Advisors] have a [high] level of trust with their client – not only when it comes to the provision of advice but especially when it comes to the protection of the information that the client provides.”

Although there are various security and damage risks associated with paper files, digital files may be exposed to a separate set of risks – such as cyberattacks – risks that must be managed carefully.

You can choose to manage your electronic documents on your own through various software applications or through front- office technology available through your managing general agency, including WealthServ or XTRAC.

Using a third-party service provider that specializes in document management can be an effective way of ensuring your files are secure. Such providers typically have comprehensive security protocols in place.

Alternatively, if you’re taking an in-house approach, recommended measures include backing up your files in a secure location, using reliable anti-virus software and using strong passwords. Also, Tomlinson suggests, thoroughly research the providers of any software you use to ensure they meet rigorous security standards.

“Ensure that the provider meets bank-level scrutiny,” Tomlinson says, “for data protection and privacy.”

This is the second part in a two-part series on record-keeping for insurance advisors.

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