Investment Executive Article – Newton’s principle of e-delivery

Dealers and fund companies must make a concerted effort to drive clients to digital channels

Isaac Newton’s first law of motion states that every object will remain at rest or move in a straight line unless compelled to change its state by the action of an external force. This is normally taken as the definition of inertia. If he were alive today, Newton’s principle of e-delivery would suggest that due to the laws of inertia, organizations will continue to produce and disseminate paper in conventional ways until the power of the Internet overcomes this force.

I recently attended the Federation of Mutual Fund Dealers’ annual conference and heard from several Canadian dealers, fund companies and regulators regarding the increasing amount of disclosure requirements coming from point-of-sale disclosure for mutual funds, the second phase of the client relationship model and the U.S. Foreign Account Tax Compliance Act during the next few months. Although generally supportive of greater transparency to investors, many stakeholders raised concerns over the barrage of communications that will hit investors in 2016. For many, these initiatives represent potential advisor/investor confusion and cost increases from more printed communications and associated postage. There was great interest in the promise of electronic communications, but also some disappointment over the obstacles in moving the needle.

Although most Canadian financial services institutions recognize the benefits associated with digital communications — with cost savings and improved customer experience topping the list — many struggle to migrate their customers to electronic-delivery channels. According to a 2013 research report from Weymouth, Mass.-based InfoTrends entitled The Future of Multi-channel Transactional Communications, 30% of banking and financial services firms’ total bill and statement volume was paperless in 2013 in the U.S. That figure was expected to rise to 44% in 2014 and to 58% in 2016. Many Canadian financial services institutions fall well short of these targets.

The regulatory landscape in Canada, while strict, actually encourages the use of electronic communications. In 2011, the Canadian Securities Administrators made amendments to National Policy 11-201: Electronic Delivery of Documents (NP 11-201) to facilitate the use of e-delivery as well as make it less prescriptive and more flexible. In the case of gathering express consent from investors, the securities legislation no longer requires a deliverer to obtain the consent of the intended recipient nor does it prescribe the form or content of any consent — although many firms still seek express consent to help reduce the risk of non-compliance. At a high level, NP 11-201 outlines the four basic requirements for e-delivery of a document:

  1. The recipient of the document receives notice that the document has been, or will be, sent electronically, or otherwise made available electronically.
  2. The recipient of the document has easy access to the document.
  3. The deliverer of the document has evidence that the document has been delivered or otherwise made available to the recipient.
  4. The document that is received by the recipient is not different from the document delivered or made available by the deliverer.

Yet, many dealers and fund companies struggle to get clients to adopt electronic communications. According to the InfoTrends report, the top two reasons why consumers embrace paper bills and statements are a desire to have a hard copy for their records and to receive a reminder to pay their bills. Both of these objections, however, can be addressed through creative communications strategies that leverage print-on-demand or even email reminder alerts.

So, how should companies move the needle toward greater e-delivery? We all know that if you build it, they may not come. So, in order to encourage adoption of e-delivery, companies need to evaluate their current performance in all relevant consumer touch points, prioritize the opportunities to impact adoption and develop marketing communications to help change consumer behaviour. The most compelling marketing messages speak to the convenience of e-delivery, environmental benefits, time savings, security and privacy, or even an offer of an incentive to sign up.
Channel management is tricky for financial services institutions as there are many options available to clients today. The question of where to access documents is important, whether through a self-service model on the provider’s website; consolidator services, such as or a banking website for bill payments; smartphone or tablet apps; email attachments; links; or text messages. Clients have such varied preferences, and there are more and more channels available every day, so organizations need to keep up. Emerging technologies and services are driving changes in client behaviour, and it is impacting their expectations for how their providers should support them now and in the future.

A communications strategy that accounts for client channel preferences as well as dealer and fund company obligations will help financial services organizations take advantage of the enormous benefits that e-delivery represents. However, without a well-planned, intentional communication strategy to help clients move to the electronic stream from printed paper, nothing will change. Just ask Newton.