Next Generation Client Onboarding

Christoph Berenbroick, Katia Arami

Client onboarding is an increasingly critical phase of the end-to-end client journey for investment managers, offering an opportunity to demonstrate client experience excellence and cement a reputation of differentiated client service. As global public and private assets continue to rise, and as  asset managers and owners need to scale in the face of mounting competition and regulatory oversight, what was once an inconsistent and manual process must evolve. By embracing new technologies, streamlining processes and bolstering governance, managers are increasingly focusing on enhancing their onboarding operating model.

Across investment vehicle types, client onboarding seams together six phases of a process that must be well orchestrated to achieve client satisfaction, secure wins, and set the path for quality client servicing and account maintenance; all while reducing both commercial & operational risk.

Historically, these phases have been handled by discrete teams and suffer insufficient governance, processes and tools. Organizations that do not address these areas risk ignoring a prime opportunity to improve the client experience, reduce risk, achieve operational efficiency, and scale in an increasingly competitive market.

The Landscape has Shifted

The client onboarding landscape has shifted in two critical areas: clients’ higher servicing expectations and increased regulatory oversight and requirements.

Client Servicing Expectations are Higher

As competition for clients in public and private investments structures continues to grow, asset managers and owners need to add value across the client lifecycle, and importantly, throughout client onboarding. Clients hold higher expectations in these four main areas:

  • Speed – Protracted onboarding can kill deals, especially when clients are sensitive to timing and issues such as cash drag. Managers who accelerate onboarding increase client satisfaction while decreasing lost opportunity risk.
  • Efficiency – Particularly as regulatory requirements mount, clients expect to receive and provide documentation with as few touches as possible. Further, contract or application negotiations that drag on due to poor communication, queue management, or substandard processes risk fouling deals and leaving clients dissatisfied.
  • Customization – As clients sharpen their due diligence and risk management functions, and as regulators call for more transparency, reporting, and control, tailored servicing rules. Managers who do not sufficiently build a servicing framework and identify client needs during the onboarding process set themselves up for unhappy clients and/or eroded margins down the road.
  • Value – The combination of the proliferation of investment structures and ensuing competition, plus regulatory requirements equates to more fee negotiations. Managers who do not build for capturing and managing this as part of the onboarding process put margins at risk.

Regulatory Requirements Continue to Build

Regulators across the globe continue to evolve requirements of investment firms across a spectrum of functions in the product manufacturing and distribution chain. Regulations demand that investment firms have strong processes, tools, and controls around a number of activities:

  • Client Segmentation – clearly segmenting clients by categories such as income and wealth, and investment acumen
  • Product Suitability – ensuring clients are investing only in those products appropriate for a given client category
  • Pre-Sale Investment Disclosure delivering required product disclosures and providing evidence thereof
  • Anti-Money Laundering (AML), Know Your Client (KYC), and Know Your Distributor (KYD) – ensuring all relevant client identification procedures and documentation is completed and documented
  • Oversight of Third Parties and Delegated Functions – executing and documenting oversight of parties contracted to perform functions such as order handling, AML/KYC/KYD, client statements and complaints handling

The stakes are high for getting compliance right. Across the globe, regulators issued financial institutions over $5 billion in fines in 2022.

Asset Managers and Owners Struggle with a Number of Key Elements

Managers are often challenged in their client onboarding in the following areas:

  • Governance – In many cases, governance structures have not adequately evolved to address the above-noted shifts in the onboarding landscape. Managers have made strides in ramping up governance in discrete areas such as AML/KYC, but there is work to be done in completing the governance structure and ensuring that all pieces tie together.
  • Process – Many managers still operate with legacy processes, which frequently present the following challenges:
    • Fragmented Workflow – leading to drops in the process and/or redundant processing and extraneous or unclear communication
    • Poor Communication – lack of guidelines on sharing procedures and media to do so
    • Lack of Transparency – inability to quickly assess onboarding status and tasks
    • Task Management – poor controls around task assignment, deadline setting, and tracking and management
    • Manual Work – pervasive manual work owing to procedural and training shortfalls
    • Over-Reliance on Client-Facing Teams – leaving the burden of non-core functions on commercial resources
    • Rigid process flow – processes that were designed to handle standardize flows and do not accommodate exception handling and timeline adjustments
  • Technology
    • Golden Source Issues – redundant information sources with no clear golden source (and frequently with unclear ownership rules) and/or no reliable source defined for certain information
    • Siloed Systems – systems that do not ‘talk with one another’ and/or do not do so in an efficient manner
    • Legacy Technologies – use of older technologies that cannot meet current-day volume and servicing requirements and do not offer efficiency or servicing gains.

Leaders are Moving Forward with Advances in Governance, Process and Technology

Leaders recognize the importance of a robust onboarding program in achieving both commercial success and safeguarding the business. Here’s where advances are being made:

  • Governance – creating robust governance structures that link functions across due diligence, operations, finance, and client servicing; setting and measuring expectations and performance; and assessing the commercial and operational viability of client requests with more precision
  • Process – re-engineering legacy processes and retooling processes to shift work from client-facing personnel to trained and dedicated onboarding resources; managers are also looking at third-party providers to perform, automate and streamline workflows across the onboarding process; and increasingly digitize processes such as contract negotiation
  • Technology – leveraging low/no-code platforms to build workflows, connect data and information stores (including CRM and document management systems), integrate third-party services (ex., electronic document management/signature, AML/KYC registries), set and manage timelines and tasks; using RPA functionality for repeatable tasks; and building advanced client portals for efficient exchange of information, requirements, and status updates.

How Alpha Can Help

Alpha FMC’s Distribution practice supports onboarding programs across the globe. We provide managers full services in the value chain: current assessment, benchmarking, operating model design, technology selection, and implementation. To learn more, please reach out to Alpha here.

About the Authors

Christoph Berenbroick
Senior Manager

Christoph is a Senior Manager in Alpha’s Distribution practice. He has extensive experience in global investments distribution and client servicing. Christoph has led engagements to expand into new markets, develop onboarding solutions, build client reporting, respond to global regulatory requirements, and leverage technology to enhance distribution and operations.

Katia Arami

Katia is an Analyst at Alpha Financial Markets Consulting based out of the Los Angeles office. Since joining Alpha, Katia has supported multiple large-scale OMS transformations. In her first engagement, she played a key role in the program’s Business Readiness team, ensuring the preparation of the business to adopt the new system upon Go-Live. In her second role, Katia currently works closely to represent business users throughout the development lifecycle. Prior to joining Alpha FMC, Katia gained experience across the breadth of the financial world in venture capital, ESG, private equity, and film finance. Katia holds dual degrees in Economics and International Development from the University of California, Los Angeles. She holds certifications in the CFA IFP and Agile Project Management.