Small inefficiencies in your processes or systems may seem like a nuisance or minor inconvenience. But over time, those seemingly small inefficiencies can add to significant time, money, and resource losses.
As the financial services industry becomes more competitive and new investors enter the market, firms can’t afford to waste money and time on inefficiencies. Have you calculated the cost of this waste to your firm? Here are some hidden costs of inefficiency to consider.
Slow Processes Cost Time
As an advisor, you wear many hats. One survey found that only 13% of financial advisors feel they have complete control over their time. But even with other responsibilities, your main goal as an advisor is to serve clients and expand your firm. Inefficiencies can cost valuable time you could otherwise spend in more important pursuits.
Research has found that less than 20% of an advisor’s time is spent meeting with clients. The rest of their time is spent doing other tasks, but perhaps the most inefficient is the 8% spent on administrative tasks like managing paperwork, data entry, and organization. When those tasks take longer than needed because of inefficient systems, the entire workload slows.
Considering the average annual base pay of financial advisors in the United States is around $80,000, advisors waste $6,400 yearly on administrative tasks — and that’s on the low end. Multiply that by every advisor and employee at a firm, and it can lead to significant losses.
Inefficient Compliance Processes Can be Costly
Staying in compliance saves firms money. But inefficient compliance processes open the door to potential issues. In 2022, the SEC filed a record number of enforcements: 760 total actions for $6.4 billion in penalties. Those enforcements come from a variety of actions, including civil injunctions, recordkeeping violations, and misleading statements.
When firms aren’t in compliance or don’t have the systems to store and maintain their records properly, routine audits become more of a headache, and there’s a greater chance of having to pay a fine. An extended audit means more time away from clients and potentially lower income, and a violation from the SEC or FINRA can lead to a penalty, a drop in reputation, and time and money spent on legal fees and other filing concerns. The bottom line is this: compliance violations are preventable with the right systems.
Physical Paperwork Cost Firms Time and Money
We’ve already established that advisors spend a lot of time on administrative tasks. And while administrative work is required to keep a firm running smoothly, outdated or inefficient processes can slow things down. One of the biggest culprits is an overreliance on paper.
On average, employees spend at least two hours a day looking for documents or information they or others need to do their jobs. That’s not only inefficient, it’s frustrating. More than 40% of employees say they would consider leaving a job if there isn’t an efficient or easy way to access the information they need.
And then there’s the cost of paper. Financial advising is notorious for overwhelming paperwork, from client onboarding forms to printed regulations and disclosures. Research has found that as much as 3% of a company’s revenue is spent on paper, printing, and storing and maintaining physical files. The average four-drawer cabinet costs around $25,000 to fill and $2,000 per year to maintain. Look around your firm at how many filing cabinets you own and see how quickly that cost adds up.
With the cost of copying, filing, and mailing physical documents, paper may cost up to 31 times more than digital documents. Paper costs your firm money, not just from the cost of the paper itself, but all the time and resources used to store and process the documents printed on them.
Save Time and Money with the Right Software
To curb paper dependence, firms are moving to digital documents. But without the right software, many advisors are left working on outdated systems that lead to frustrations and friction. In one survey, 65% of advisors reported losing business from clients or prospects because of outdated software — a significant loss of potential revenue and growth opportunities. Conversely, advisors with modern technology are 50% more likely to see growth in new client assets and 33% more likely to get new client referrals.
Repetitive tasks like scheduling and reconciling reports take 41% of advisors an average of two hours or more. Automating those tasks with modern technology can cut that time down significantly, leaving advisors more time to spend on meaningful tasks.
These inefficiencies add friction to the advisor and client experience when firms operate more slowly than necessary, which not only slows progress but can lead to a loss of new clients, lower employee retention, and lost time and resources.
One of the most effective ways to fight inefficiencies is through an integrated, cloud-based data management system. Docupace integrates with numerous other software to create a comprehensive system for advisors and back-office staff for less time and reliance on physical paperwork and more time on strategic growth. Click here to learn how Docupace can lead to more efficient processes for your firm.
