Moving to electronic signatures

Under current government guidelines, advisers and mortgage brokers cannot meet face-to-face with their clients, presenting a challenge when it comes to getting documents signed.

As a consequence, electronic signatures are becoming more prevalent. The Law Commission ruled last September that electronic signatures are valid. The likes of the Institute of Chartered Accountants in England and Wales have stressed that safeguards must be in place to ensure signatures are not made under duress or fraudelently.

During the pandemic, the advice industry has had to seek alternative ways of working. But not all providers have adapted and many still require a wet signature on documentation.

Nick Eatock, chief executive of Intelliflo, says: “To overcome the challenges brought on by coronavirus, we’ve seen that advisory firms are making better use of the technologies available to maintain their client relationships, and e-signatures have been a key part of this.”

He observes that Intelliflo’s own digital signature functionality, DocuSign, experienced more than 10 times increased usage between February and April 2020.

“The changing demands of advisers and their clients have prompted many providers to introduce e-signature support on a number of key documents,” Mr Eatock adds.

Here to stay?

Although some restrictions on working are being lifted in the UK, it seems that face-to-face client meetings will remain few and far between – at least for the rest of this year.

Jackie Boylan, head of Fidelity’s FundsNetwork, notes: “Even as social distancing measures are relaxed, many firms are likely to rely upon digital measures of communicating with clients – rather than face-to-face – for some time, and therefore it’s important platforms are able to support them with this.

“Electronic signatures are likely to play an increasing role in these interactions, and processing of documentation.”

In an update published on April 20, the Financial Conduct Authority set out its expectations of firms when dealing with the need for a wet signature.

The FCA stated: “Our rules do not explicitly require wet-ink signatures in agreements, nor do they prevent firms from using electronic signatures in agreements. The validity of electronic signatures is a matter of law. Firms should consider the legal position themselves because we cannot give legal advice.”

The regulator added that firms must also consider any related requirements set out in its Principles for Businesses and general rules.

“Firms should consider the client’s best interests rule (COBS 2.1.1R) and the fair, clear and not misleading rule (COBS 4.2.1R) to ensure that, when a client signs a document electronically, this does not make it more difficult for the client to understand what they are agreeing to,” the FCA said.

Mark Turner, managing director in Duff & Phelps’ compliance and regulatory consulting practice, says: “The FCA is rightly seeking to do all it can to allow businesses to continue to operate in the current environment." 

But this does not mean it will accept processes that conflict with its expectations.

Making the switch

FundsNetwork was one of the providers that began accepting e-signatures during the lockdown restrictions in an effort to help advisers.

I don’t think the FCA’s stance is entirely clear or provides clarity to advisory firms Minesh Patel, EA Financial Solutions

Ms Boylan explains: “In the early stages of the crisis, we acted very quickly to address the challenges advisers were likely to face through remote working – all heightened by a combination of extreme market volatility, business disruption and the approach of tax year end.

“We made changes to ensure we were able to accept documents signed digitally by DocuSign or Adobe Sign in the approach to tax year end and have since expanded this to cover electronic signatures from any provider legally recognised in the UK.”

But not all providers have been as quick to adapt, posing a challenge for many advisers.

The switch to electronic signatures cannot come quick enough for some advisers and their clients.

Minesh Patel, chartered financial planner and director at EA Financial Solutions, confirms: “What we have found is that providers still sometimes, or quite often, insist on wet signatures, which I find remarkable during this period.

“The only way we’ve been able to deal with that is to send it through the post. It’s just a bit archaic, this need for wet signatures.”

He adds: “I don’t think the FCA’s stance...provides [enough] clarity to advisory firms.”

Mr Patel estimates that having to post a document to a client to get it signed in wet ink adds about a week to the process.

“Then you have to send it onto the provider if they want the actual wet signature documents. It’s time consuming, it’s not necessary when there is an electronic signature or your confirmation on the client’s behalf. That should be sufficient I think,” he says.

Left behind

While e-signatures are not yet universal, Mr Eatock believes that as more providers adapt to offer this solution, others will follow suit.

Conor Murphy, chief executive of Smartr365, believes there is still work to be done when it comes to electronic signatures.

“It would almost be helpful if the regulator were to define a standard that they felt was acceptable across the board.”

Any lender that insists on ‘wet ink’ signatures on documentation from now on, may find themselves at a disadvantage while face-to-face interaction remains impossible.

Mr Murphy says: “As more of the industry moves in that direction, and there’s far less physical interaction or posting of documents, what will happen I think is that any lender which insists on that will become more of an outlier.”

He explains that if there are some lenders unwilling to allow e-signatures, that will become a bigger factor in which lenders are selected by both advisers and clients.

“It’s perfectly allowable to choose speed and service as the reason for choosing a product or a lender,” he notes.

Ellie Duncan is a freelance journalist