Guest blog by Charly Deighton, Sales Director – Northern Regions, Connective
One aspect of wealth management that has challenged relationship managers and clients for many years is the laborious process of securing wet signatures, required to confirm consent to a vast array of transactions and other activities.
In a recent webinar with Wealth Dynamix I explained why the pandemic has given rise to a significant shift in attitude and adoption of digital signatures. Existing users have made digital signatures the status quo, and are accelerating their efforts to integrate this way of working across all departments and functions. And non-users have kick-started initiatives so that they can overcome the physical limitations of remote working.
Pre-pandemic this trend had already begun, driven by client expectations for greater convenience, more self-service, round-the-clock availability and mobility, and ease of use. And with the patience of clients wearing thin after a decade of ever-increasing regulatory paperwork to contend with, pressure to find a more efficient and convenient way of managing the signature process has never been greater.
So, given that digital signature technology has existed for many years, why has the wealth management sector been so slow to act?
I’ve identified the most ardent misconceptions on digital signatures that explain the slower conversion to digital signatures in wealth management.
Misconception #1 – All documents have to be signed with a qualified electronic signature to be legally valid.
The legal value of an electronic signature depends on your ability to prove a) the identity of the person who applied it, and b) the signed document has not changed after signing. There are several different ways to capture digital signatures, involving a trade off between security and ease of use.
Qualified signatures are undoubtedly the most secure, requiring a signature to be validated with a qualified personal certificate (e.g., a government-issued identity card), but can be difficult for clients to provide. If a qualified signature is contested, the onus is on the disputing party to prove that a qualified signature is invalid.
Other methods do meet legal requirements, although the burden of proof is on the wealth manager to prove validity, when disputes arise.
Advanced methods are easier and more cost-effective to collect. They require cryptographic sealing of a document post-signature, so it is tamperproof, and the signatory’s ID is considered valid (even if it is a squiggle on a touchscreen) if advanced methods of verification are used—for example a client login with authentication (preferably two-factor).
Basic methods, for example an image of a signed document emailed to a relationship manager, are generally used as a stopgap. They are not advised for fraud-sensitive processes because the ID of the signatory is not validated.
Misconception #2 – Digital signatures are cumbersome and time-consuming to implement.
The fastest and easiest way to introduce e-signatures into your firm is to use an out-of-the-box solution for routine, ad hoc documentation, such as NDAs. For more pervasive use of digital signatures that are an integral part of your firm’s workflow, solutions offering plug-and-play APIs enable you to integrate eSignature capabilities with minimal effort.
Misconception #3 – Paper and ink are free; eSignature technology is expensive
When evaluating the business case for digital signature technology, wealth management firms are surprised to learn the true cost of gathering wet signatures. Printing, paper, postage, and stationery costs quickly rack up, and the time taken to gather wet signatures must also be factored in—including preparing documents, chasing clients to sign and return them, and validating them. Add to that the likelihood of losing documents, which creates compliance risk, and the cost of eSignature technology becomes highly competitive.
As soon as these misconceptions concerning the practicality, efficacy and cost of digital signatures are fully understood, wealth managers are more incentivised and enthusiastic about adopting eSignature technology. Indeed, the experience of COVID-19, and the challenges that has posed in terms of requesting, tracking and securing wet signatures, has led to an unprecedented surge in the uptake of automated alternatives, which is likely to continue for the foreseeable future.