By making an investment in digital document management technology, RIA firms can realize substantial savings in annual operational costs, while also seeing their business values skyrocket, according to a new report from Laserfiche, a document management solutions firm.

Laserfiche, which worked in partnership with Nexus Strategy on the report, identifies three key areas where digital document management technology has an identifiable impact: Space efficiencies, back-office efficiencies and compliance efficiencies. An underlying increase in business valuation that accrues from increased efficiencies and higher profitability is described as a fourth area that is emerging in importance.

The report analyzes emerging advisory firms—between $500,000 and $999,999 in annual revenues; established advisory firms—between $1,000,000 and $3,999,999 in annual revenues and enterprise advisory firms—$4 million or more in annual revenues.

Creating space efficiencies is one of the most visible benefits of using digital document management technology. On average, about 6% of revenue for emerging and established firms and 5% of revenue for enterprise firms is spent on rent costs.

The implementation of technology upgrades results, on average, in an annual savings of $8,000 for an emerging firm, $18,000 for an established firm and $27,000 for an enterprise firm, according to the analysis. Firms using digital document management systems are able to reduce storage space or even move into a smaller office.

Even more dramatic is the impact that digital technology has on back-office efficiencies, which can eliminate the need for a staff position to manually alphabetize, sort and file documents. Digital search and retrieval allows enables staff to locate critical information in seconds.

Laserfiche estimates that salaries and associated expenses for back-office staff represent 24% of revenue for emerging firms, 27% of revenue for established firms and 23% of revenue for enterprise firms. By using digital technology, emerging firms realize a 4.8% reduction in total overhead costs, established firms a 5.4% reduction and enterprise firms achieve a 4.6% savings.

The complicated regulatory landscape has also caused RIA firms to dedicate significant time and resources to keeping up with the latest rules and regulations. A recent study by JD Power and Associates found that advisors are spending an average of nine hours a week per advisor on compliance-related procedures, but firms with established efficient systems cut that number to five hours a week.

The impact of compliance efficiencies is substantial in reducing total overhead costs, quantified in terms of time and savings. For emerging firms this means a savings of $19,000, established firms save $37,000 and enterprise firms realize $158,000 in annual savings.

The overall impact of back-office savings through the use of digital document management can be seen in how the RIA firms are valued. For emerging firms, an increase in profitability of $43,000 through back-office savings resulted in an increased business value of $216,000; established firms realized $89,000 increased profitability, resulting in an increased business value of $626,000 and enterprises firms, where back-office efficiencies accounted for $342,000 in savings, saw their business value skyrocket by $3,421,000.