4 Things Your Clients Need to Know About Digital Signatures

It’s easy to see the benefits of digital signatures for financial advisors. Broker-dealers and RIAs can save time and money. A lot of financial clients are tired of paper-based processes. Many tech-savvy clients expect to be able to access services anytime and on any device.

But just because your clients are eager for convenience doesn’t mean they will automatically be comfortable with using digital signatures. This is especially true because of the sensitive information found in many financial documents.  

Most of your clients have probably signed some sort of basic agreement online, whether they’ve clicked “I agree” on a term sheet or have signed to pay a credit card bill. But that’s not always the same thing as securely signing with a digital signature service.

Education is the most important aspect of getting your clients on board with using digital signatures. It’s important to answer their questions clearly and confidently to help them become comfortable with this new technology.

Are Digital Signatures Legal?

When financial services clients first hear about digital signatures, their first question is usually, “Are digital signatures legal?” The answer is yes! Digital signatures are legal under the ESIGN Act and UETA. The SEC and FINRA also approve them. In fact, some digital signature services offer a lot more legal evidence than you’d get with a signature on a physical piece of paper.

It’s important to note that not all services can give you the same amount of legal evidence. The American Bar Association (ABA) has created guidelines to help you know what to look for in a digital signature vendor. These guidelines say you should look for five features in your digital signature service:

• Signer’s identities must be proven
• There must be disclosure and consent to use digital signatures
• The document must be secure against tampering
• All signers should have access to the document
• All actions taken should be documented in an audit trail 

If your digital signature service meets all of these criteria, you can reassure your clients that your digital signature service is completely legal.

What About Security? Is My Personal Information Protected?

These days, it seems like we’re constantly hearing about another data breach. From big retail companies like Target to financial services companies like JP Morgan, no one is safe. Because of this increasing threat, it’s more important than ever to protect your clients’ personal information. 

While no system is 100% hack-proof, there are safeguards you can put into place to protect your clients’ information from hackers. With digital signature services, your clients can be protected against fraud through a process called identity authentication.

With this service, your clients must prove their identities before they’re able to access any documents. Clients can do this in by entering:

• Their social security number and date of birth
• A secret code sent to their cell phone via text message
• Answers to secret questions you share directly with your client
• Answers to questions based on 30 years of public databases (knowledge-based authentication)

Your digital signature service should also encrypt documents both at rest and in transit.

How Do You Protect Against Tampering?

The methods mentioned above tell you how to limit access to documents on the front-end, but your documents also need to be protected from tampering after they’re signed. You should look for a digital signature vendor that offers tamper protection.

This handy feature makes it easy for you to see if a document has been tampered with. All you have to do is open the finished document in a PDF reader. If the document is tamper-free, you’ll see a green checkmark at the top of the screen. 

If you see a yellow exclamation point or a red x, there’s a chance someone has tampered with your document. You can click on the alert for more information about what was changed. It could be something as insignificant as changing the capitalization of a word, or it could be something as important as changing the terms of an agreement. 

What’s In It for Me?

If you’re adopting digital signatures, you already know the benefits for your firm. But your clients don’t care about that. They will want to know about the benefits for them. It’s important to clearly communicate why your clients should be excited about this technology. Here are some of the top client benefits:

• Clients can sign documents anywhere—not just when they’re in the office
• On-demand access to services on your website
• Faster document turnaround means faster access to services

While some clients will inevitably cling to the paper processes they are accustomed to, our research has shown that many financial services clients are eager to use digital signature technology. With these considerations in mind, your firm can craft a rollout plan for your digital signature project to get your clients on board.