At the conclusion of last week's TD AMERITRADE Institutional conference in Orlando, I ended up talking about technology with an advisor while waiting for my ride to the airport. During our discussion, the topic of document management and paperless office came up. As we discussed our own techniques for managing documents, I realized that the advisor's focus was on document storage while I was explaining the merits of true document management.
So what's the difference between document storage and document management?
My definition of document storage is the process by which documents are captured electronically, assigned filenames using a naming convention, and saved within a defined folder structure. The emphasis in this process is capturing and placing documents in logical places with logical names so users can follow the naming conventions to find specific documents. While this process certainly allows a firm to go paperless, it's far from a truly robust document management system.
Document management builds on the document storage process, but it adds several essential functions to, well, manage documents and the information they contain. I can think of five essential functions that expand on document storage. They are:
Here's the 2-minute description on why these five functions are required in a true document management solution.
Document Metadata: Metadata are the tags and keywords associated with each document to provide basic information as to what kind of information the document contains. Common metadata in an advisory firm includes the type of document (e.g. trade confirmation, account application, beneficiary form, tax document, etc.), client name, and date of the document. Optional metadata includes a purge date (when the document can be removed from the management system) and keywords that pertain to the document content (e.g. capital loss carryover worksheet, Roth IRA application paperwork, 2006 Form 8606, etc.).
OCR: Scanning documents simply makes a picture of the form. OCR must be run on the document in order to convert the text in the image into something that can be read by software. Without OCR, the scan remains a picture and there's no way software can look inside a document to find keywords or search terms.
Indexing and Search: Full-text indexing and search provide the ability to quickly access any document contained inside the document management system. This is why all documents need to have their text made searchable by OCR. Imagine searching the Internet using a gigantic tree of folders. Seems arcane, inefficient, and hugely frustrating to me. It's far easier to type in search terms and keywords into a search engine. So why spend time clicking through a multitude of folders in an attempt to access an archived document? Is IRS Form 706 filed under Tax or Estate? It could be both. So why not type search terms and keywords and let the management system do the heavy lifting?
Audit Control: Advisors operate in a business environment subject to constant regulation. Both FINRA and the SEC have rules pertaining to record storage, and one of the most important rules is that electronic documents must be stored on a Write Once, Read Many, or WORM, system. In such a system, documents cannot be altered once they are captured in the system (the "Write Once" requirement). Imagine if a trade confirmation was captured for a 1,000 share order, but the advisor's instructions were to trade 10,000 shares. Without audit control, employees could modify the original confirm and change the numbers from 1,000 to 10,000 and hide the trading error. With audit control, any attempt to modify or delete the original document creates an audit trail of who, when, and what changed about the document.
Permissions and Security: Adopting a truly paperless office means that anything and everything that can be captured electronically is placed into the document management system. Most advisors use document management systems for all of their client records, but the management system should also be used for company financials, HR records, compliance filings and other similar documents. But without appropriate permission and security controls, any user can view the contents of sensitive documents. Document management systems provide the ability to restrict access to individual or complete groups of documents, protecting the information they contain from wandering eyes.
These five functions illustrate the power delivered by adopting a true document management solution over a document storage system. Small offices might get by saving scans in PDF and copying them to appropriate folders, but as the volume of documents grows and grows, the system quickly becomes unmanageable. The document management system includes critical functionality designed to tackle the challenges of filing millions of documents and solves many of the drawbacks of a simple storage system.