How Automating Client Onboarding Can Help Small Investment Management Firms

New clients bringing fresh asset inflows. Every investment manager wants them (well, most do!).

So it’s important to make the onboarding process as smooth and painless as possible. As the old saying goes, “first impressions count.”

And if a client’s first experience of working with you is fast, easy and convenient it can set the tone for the rest of the relationship.

Unfortunately, many investment managers’ client onboarding processes are laborious and inefficient, often involving extensive manual form-filling and repetition. That can be costly and time-consuming for the investment advisor or asset manager, and frustrating for clients – especially the increasingly important breed of millennial investors, who have come to expect fast and easy automated services.

Regulatory Focus on Accurate Client Information

It’s not just about keeping prospects happy either. Regulators around the world are also keen to see more rules-based and robust information capture processes – not least to strengthen AML and KYC practices, and ensure firms comply with countries’ FATCA/GATCA requirements.

Another area of emphasis is client suitability. In the United States, FINRA Rule 2111 requires firms to have a reasonable basis for believing “a recommended transaction or investment strategy involving a security or securities is suitable for the customer.”

This belief should be based on information obtained on the customer’s investment profile, which includes details such as:

  • The customer age
  • Financial situation and needs
  • Investment experience and objectives
  • Other investments
  • Investment time horizon
  • Liquidity needs
  • Risk tolerance
  • Tax status

Similarly, the European Union’s newly-introduced MiFID II focuses on client suitability and appropriateness in an effort to enhance investor protection.

To that end, firms providing investment advice or managing client portfolios must conduct detailed assessments to ensure any recommended investment services and financial instruments are suitable for that particular investor (whether it’s an institution or individual), and are in line with their risk tolerance and ability to bear losses. Given investors’ circumstances change over time, ensuring ongoing suitability will require frequent client interactions and assessment updates.

Benefits to Investment Managers by Automating Client Onboarding 

By automating the information capture, identification and risk assessment processes wherever possible, onboarding becomes faster and more efficient – helping firms meet their compliance obligations, streamline their workload and improve the client experience.

A number of tools are coming to market to help in this area. One we are road testing at Empaxis is an automated client information completion app called NameDrop.

With NameDrop, users only need to enter their personal data once. The platform then provides a fast, easy and secure way for them to share that information with other people and businesses.

For investment managers, NameDrop serves as a powerful information-gathering and lead-generation tool. By autofilling forms for your customers, the app saves them all the hassle, while eliminating the need for error-prone and time-consuming manual data entry on your side. And the collected data is properly structured so it can be delivered directly into your firm’s CRM and operational systems.

Optimizing the CRM’s potential

Automatically populating the customer information fields in your CRM brings further advantages.

Instead of becoming a glorified contacts device, as it is at many firms, inputting and maintaining accurate and up-to-date client data within the CRM will enable sales and relationship management staff to enhance how they track and manage their client relationships.

This will help your teams to better respond to clients’ needs, and identify opportunities to up- or cross-sell relevant products and services.

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