Financial services firms worldwide face the same challenges with investor onboarding: meeting ever-changing compliance regulations and managing the risk of a violation. Outdated manual processes, like back-and-forth emails and repetitive form submissions, simply can’t keep pace with the speed of change.
Fortunately, there are a handful of technology offerings providing a powerful alternative.
Onboarding technology can completely transform how firms onboard new investors. It can scan, mine and learn from large quantities of data, saving time and mitigating risk. Some software will even proactively flag gaps in compliance, making life easier for compliance officers, fund managers and investors alike.
What’s more, investor expectations for a seamless customer experience via technology-based services are rising. Roubini ThoughtLab’s Wealth and Asset Management 2022 report shows that investors are looking to manage their money the same way they shop, socialise, communicate and learn: with user-friendly digital tools. And it isn’t only Millennials and Gen Z who feel this way; seasoned investors are even more concerned about digital access than their newer counterparts.
Investment firms are rethinking their strategic priorities, with technology at the top of the list. Onboarding technology doesn’t only drive efficiencies; it also helps penetrate new customer segments, deepens client relationships, and expands distribution.
In this post, we’ll explore why digital leadership is critical to a seamless investor onboarding experience.
The true cost of manual onboarding
Twentieth-century ways of working, like signing physical forms and manually entering customer information into databases, have persisted in financial services long past their expiration date. Europe in general (and Central and Eastern Europe in particular) has been criticised for lagging behind the U.S. and China in adopting compliance technology, largely due to the complexity of Europe’s regulatory environment.
Although some firms have modern onboarding systems in place, traditional processes are still common.
The risks inherent in those legacy processes include, among others:
- Massive time cost due to slow and repetitive tasks
- Human error, leading to inaccurate data
- Increased exposure to corruption and fraud
- Lost documents and incomplete audit trails
- Inability to track and analyse trends over time
- Slow onboarding and customer churn
Approving new investors is a risk-based process—which is to say, time-consuming. The level of manual effort required at each step increases the risk of human error, and by extension, non-compliance.
And the time cost cannot be overemphasised. Average investor onboarding processes take about 41 days to complete. With this delay come significant downstream complications, including investor churn and missed investment opportunities/profits.
Fortunately, there’s still time to catch up. A wealth of technology exists on the market to help firms keep compliant and impress new investors with painless onboarding.
Frictionless onboarding yields satisfied investors
When it comes to automating your investor onboarding processes—and AML/KYC in particular—the list of benefits is long:
- Streamlined investor experience: Investors have high expectations, as set by contact with tech providers like Google and Amazon. The desire for a smooth, seamless onboarding experience is stronger than ever, and investors are prone to abandon onboarding processes that feel too cumbersome
- Accurate client risk profiles: Technology can automate the creation and maintenance of client risk profiles, assigning numerical risk scores based on data and monitoring changes over time. This enhances due diligence and ensures continued compliance throughout the client life cycle
- Fewer false positives: Alerts alone will not support an effective and efficient compliance programme; the sheer volume of false positives is a significant pain point for compliance teams. Attaching alerts to high-quality data reduces volume and ensures thorough investigation into cases where an investigation is genuinely warranted. Technology can even recommend next steps based on past actions and predicted risk
- Improved beneficial ownership: Today’s software-as-a-service (SaaS) products can “read” data from both databases and scanned documents that previously required manual entry. For compliance teams working their way through massive piles of data, technology improves the ability to draw accurate conclusions for a risk-based approach. Due diligence on beneficial owners is a point of increasing focus worldwide, and technology supports firms’ efforts to comply without overwhelming staff
- Automated audit trails: When onboarding is completed within a compliance technology, there’s no need to maintain manual records or search for misplaced documents. Adaptive technology tracks every interaction automatically, so you’ll always know who completed which actions and when. When regulators ask for an audit trail, well-prepared firms can easily supply one with the click of a button
- Managing regulatory change across markets: The regulatory environment is ever-changing, particularly as organisations navigate international borders. Technology can adapt to changing requirements in real time, automatically identifying information gaps and generating corresponding alerts. This reduces the burden on compliance teams to hit a constantly moving target
Regulators have embraced onboarding technology—and so should you
Historically, many firms have been reluctant to implement new technology that touches AML and KYC protocols because they weren’t sure how regulators would react. In Europe, new remote customer onboarding guidelines demonstrate a growing and continued interest in financial services technology and how firms can leverage it to mutual advantage.
Onboarding technology like MaxComplyTM provides firms with the agility to keep pace with compliance requirements and meet market demands, providing investors with a frictionless experience that maximises both comfort and returns.
The cultural shift to investor onboarding technology has arrived, and IQ-EQ can help keep your firm competitive. Contact our team today to learn how to streamline onboarding while improving investor relationships.
