I want to expand upon an earlier post about identity theft with a detailed explanation of some of the steps we take to protect client information.

Our industry has very strict compliance regulations and rules governing recordkeeping. Required documents range from client personal information and account forms to meeting notes. Many firms have filing cabinet upon filing cabinet which eats up space that they have to pay for. Sometimes, a staff person could spend 20% of their time filing and pulling client files. The cost of this “storage” is often passed on to the clients. And, we all know the environmental impact of so much printing and copying.

After leaving a large national firm to start Divergent Planning, we decided to go with a paperless system that enables us to store documents in virtual files on offsite servers. The company we use is Docupace Technologies.

There were a number of reasons for our decision to go paperless other than those mentioned above. Selfishly, being "paperless" allows us to work from anywhere and be able to run our firm remotely with the same expertise and efficiency as we can from our office. Theoretically, Ara and I do not even need a traditional brick and mortar building other than to hold client meetings. It will be a very rare occasion that we would not be able to access important information for a client from almost anywhere. Also, by not having our own servers and not storing important documents on our own computers we decrease the chances of local outages, viruses and theft. If our laptops were stolen or lost, it would be very difficult for someone to find client information since we store everything at Docupace.

Like many things, there are some risks.

What if the internet goes down for an extended period?We each have internet access at home and we have our own mobile hot spots. These end up being through a total of 3 different providers so there would need to be a mass outage covering several service providers for us to not be able to go online. If it were to happen, Docupace can send us all of our client documents on CDs (it would be like the stone age but we would manage).

What if Docupace is hacked? We did a thorough screening process of the options in the marketplace and feel very comfortable with Docupace. These types of companies’ existence demand they make security their number one priority. If they are hacked it would be the same as if physical files were stolen from our office and we would immediately notify everyone as to steps to take to protect identities. We are small but companies as large as ING and Royal Alliance also use Docupace.

We also make (I guess we actually insist since there is no actual physical forcing that occurs) our clients who are not using some form of identity theft monitoring program to at least order and look at their Free Credit Report each year.

As “old” as I sometimes claim our industry is, I must admit they are getting better with the massive amounts of paper waste. Now, if only we could figure out how to stop the meaningless sales literature we receive from fund companies and investment firms. You would be surprised how much “junk” we get. But that is for another post at another time.

Matt

Here is a great video poking fun at the all to serious national debt limit concern. It paints the picture perfectly and compares it to the average American consumer. The "punchline" is at the end. 

Matthew B. Brock, CFP®

In my series about fees we will explore some common investment fees as well as some fees you may not realize you are paying

I have explained basic investment fees and lesser known product fees. Now, I want to let you in on some of the fees we (and many advisers or planners pay). There are, of course, overhead costs to running a financial planning firm but what we are going to look at are the charges/fees the industry charges us.

Like many industries the financial world demands Continuing Education credits for various licenses. It shouldn’t come as a surprise these cost money. Some are actually really great and worth the cost. These are usually the ones consisting of updates to laws, policies, etc. However, there are many without much benefit. We have continuing education requirements for our securities licenses, insurance licenses and our various designations. Each of these have different renewal dates and their own License Fees to renew. Most continuing education classes run about $20-$50 each. Licenses and designations vary greatly. We have to be insurance licensed in every single state we conduct business. As of this writing, we are licensed in 15 states. Some are only about $75 every year or every two years but others are several hundred dollars. Since each state handles their own insurance regulatory commission, they determine the cost and procedure.

Almost every company charges Custodial Fees for IRA and brokerage accounts. They vary, but are usually $20-$50 per year. Our client accounts are held through Pershing, LLC. For clients who have a certain amount held with us we cover their custodial fees for each account.

Not all planners or advisers use a Broker/Dealer, however we chose to have one for many reasons. H.Beck, Inc. is the name our clients see on many of our disclosures and forms. They handle many of the things we don’t want to handle. They create our forms, process forms, process checks, perform compliance duties and the list goes on. The amount we “pay” to them is tricky to explain because one of their main functions is to process all of our business. For example, when a client pays us a fee to mange their assets or do a financial plan the fees actually go to, or through, our Broker/Dealer who in turns sends it back to us at a certain percentage. The percentage is based on a number of factors and I am not able to disclose the amount. Not all of the amount the Broker/Dealer retains is kept by them. They also have to share with the underlying investment our clients use. For example, if our client is using ABC Fund Family, then the fund company gets a bit of the action as well.

We have other fees we pay to our Broker/Dealer as well. These fees are unrelated to the amount or type of business we are doing with them and they also vary based on the actual broker/dealer. I cannot disclose the amount we pay but I can tell you it goes toward several important things. One is for some of our “back office” technology and our Errors and Omissions insurance. The errors and omissions insurance is near $4,000/year for us.

There are a number of transaction-based fees we pay. Our industry has what is called Ticket Charges. These are fees we are charged every time a client buys (and sometimes sells) an investment. There are a number of other small fees we are hit with here and there but it wold well beyond this post to explain them all.

This is not a full list of all the fees planners and advisers may have to pay but it is a good overview.