Client Onboarding for Competitive Advantage, by Shishir Vadhavkar and Alissa McCaddin

An in-depth look at the search for competitive advantage in the financial services industry

Using Data Management to Improve the Customer Experience while Boosting Productivity and Cutting Costs in the Financial Services Industry


The wealth management industry is going through a paradigm shift. Increased regulations and a problematic economic environment pose a significant challenge for financial services firms. After the financial downturn of 2008, there has been significant reduction in revenues from fee-based advisory services. Investors no longer blindly trust the investment guidance of their financial advisors (FAs). They are increasingly wary of commission-based FAs, who often put their vested interests ahead of their clients’ interests. As investors become savvier, they expect quick responses to their needs, and demand different scenario simulations for the potential performance of their investments.

Investors are now looking beyond the three primary asset classes—stocks, bonds and cash. Keen to explore investment opportunities in alternative asset classes such as commodities, private equity etc., more and more clients today prefer opening ‘managed accounts’.

At the same time, financial institutions are struggling with evolving regulations. Lack of effective Know Your Customer (KYC) and Anti-Money Laundering (AML) compliance systems resulted in a fine of $1.9B for a global bank in 2012 for violations of the Bank Secrecy Act. Another large financial institution was fined $619M under similar AML laws. A multinational bank was fined $670M for trading with countries like Iran and Libya that are on the US sanctions list. All of the above factors are compelling banks and financial services firms to revisit the significance of efficient client onboarding for improving client acquisition and retention, increasing the usage of financial products and services, and conforming to regulatory compliance.

Renewed Focus on Client Onboarding in the Wealth Management Industry

Identifying and transitioning a prospect to a client is a complex and cumbersome process due to the increased regulations in the financial services industry. For a Wealth Management Financial Advisor (FA), both rigor and speed are critical for compiling complete and accurate data that can be made available across the enterprise. The due diligence for regulatory compliance throughout the client lifecycle drives the need to ensure a positive client experience during all phases of client onboarding. The ease and accuracy in acquiring data from the client and then disseminating it throughout the enterprise is vital to an effective onboarding process.

Collecting accurate data with a cohesive, rapid approach remains critical to the investment management process. However, a recent survey by a leading independent research and advisory firm indicated that 70% of the companies viewed client onboarding as primarily either a back office function that needed cost-containment attention or a front office automation issue. Only 30% recognized efficient client onboarding as a competitive opportunity.

Client Onboarding - Figure 1

It’s time for wealth management firms to recognize that a flawless customer experience at every touchpoint will win more business from clients and result in more client referrals. A serious effort to improve the onboarding process as a significant part of the customer experience will more than pay for itself, and will result in increased customer loyalty, and a significant competitive advantage.

A Multitude of Challenges Accompany Client Onboarding

Under the USA Patriot Act and equivalent foreign regulations, it is mandatory for the Financial Services Organization (FSO) to conduct legal due diligence that validates each prospective client’s identity, financial profile, ability to satisfy financial obligations, and acceptable risk-tolerance level. These regulations also mandate the FSO to benchmark proposed transactional activities (depth and breadth of client servicing and resource allocation requirements, etc.).

Most of the information captured during the initial stages of prospecting is used throughout the lifecycle of a client. During the onboarding process, not only do the FAs require client data but they also need to process relevant documents and identify the asset class for opening various accounts. In addition, compliance with changing regulatory demands (KYC, AML, FINRA 2111 and FATCA in US, MiFID II in Europe), ambiguity in roles and responsibilities of the representatives across functional teams, and absence of policies to identity and access management further aggravate the challenges.

Multiple representatives from sales, marketing, customer service, compliance, and IT departments are involved with the onboarding of a client. Given the different combinations of products and geographic market segments, FSOs end up using multiple applications. The resultant process discontinuity and silos of client data inhibits a unified view of client interactions at each touchpoint, which is essential to understanding and managing relationships more effectively.

The process discontinuity is time-consuming and escalates the cost of both human and financial capital. It also results in uncoordinated efforts among various departments involved in client onboarding, which leads to incomplete, inaccurate, and unreliable information, missing signatures, duplicate data entries, and erroneous forms. Many times, FSOs have inconsistent policies and procedures across departments and business lines. This disconnect results in multiple workflows for the multitude of regional products and business lines, which lends another dimension of complexity to the onboarding process.

Perhaps the biggest issue is the complete breakdown of the overall customer experience during the onboarding process. A disheartening first impression could perpetuate the image of distrust and a feeling of frustration. Consequently, an Advisor could calculate the loss of business due to prospect abandonment during the onboarding process; however the cost of lost opportunities due to negative word-of-mouth or social media reviews could be greater and difficult to calculate.

As challenges mount, wealth management firms have not done enough to leverage advancements in technology that could alleviate some or all of these challenges.

Integrated Client Onboarding is Sine Qua Non for Deep Client Relationships

The growing complexity in client onboarding due to the shifting landscape of wealth management has created the need to design an entirely new client experience by embracing advancements in technology. Business Process Management (BPM) software can be an effective tool to model the onboarding workflow and automate it.

It integrates different internal and external applications for bidirectional flow of data and ensures process continuity across application silos. It also combines all internal and external representatives involved in the onboarding process that undertake activities such as capturing a lead, collecting client information, opening an account, managing settlements, executing trades, underwriting, and conducting supervisory asset quality reviews, etc. Moreover, efficient workflow management facilitates parallel processing of various onboarding activities. An integrated onboarding platform with normalized homogenous global data increases productivity and shortens response times. Additionally, the platform provides quality data for both internal and external reporting.

Mobile Devices Increase the Efficiency of Onboarding Activities

Historically, branch-based banking has been the preferred channel for customers’ investment needs. With the increase in the adoption of tablets and smartphones, customers are increasingly looking at alternative channels for accessing information, managing finances and purchasing financial products and services. The use of web forms and mobile devices for capturing customer information not only improves the customer experience but also results in significant cost savings for firms by accelerating the onboarding process through digitized paperwork, refined processes, and electronic signatures. It enables FAs to focus on strengthening client relationships and giving clients excellent service, as well as growing revenue by cross-selling, and acquiring additional held-away assets during onboarding. The FA is able to access client data anywhere, and at any time. This not only improves response time but also decreases the cost of managing data.

The access to back office information to streamline and personalize front office interactions contributes to superior customer service and the reduction of cycle time to open a new account. Moreover, it facilitates faster delivery of value-added services like financial advisory dashboards, which can enhance the overall customer experience.

Process Integration Improves the Efficiency of Downstream Applications for Customer Onboarding

Solely automating the account opening process is not enough. Customer data captured from multiple sources needs to be consolidated to maintain consistency and ensure process continuity across various applications such as CRM, Governance, Risk and Compliance (GRC), and portfolio management and accounting. Data management investments in these areas not only improve the onboarding experience for clients, but also boost productivity across the firm. Additionally, when a firm has accurate client data, it can appropriately and quickly assess high risk clients. Regulatory rules and complexities stipulate benchmark duties for fiduciary organizations to act responsibly and uphold client’s best interests at all times. The imposed fiduciary disciplines mandate that a FSO must conduct periodic reviews of the manner in which the FA:

  • Determines a plan-of-action for managing and changing client holdings
  • Selects the right portfolio operating model
  • Exercises risk-mitigation protocols

As part of their fiduciary duties, FAs are tasked with mitigating financial risks for clients while executing a strategy consistent with client goals. Cross-application data connectivity and process continuity enable the firm to respond to fiduciary challenges. An integrated platform also improves a firm’s ability to consistently implement a uniform policy across its divisions and geographic locations. This solution will better prepare firms as they focus on their overall risk exposure and risk management in order to determine the degree of supervisory attention necessary to ensure that potential weaknesses are addressed and that risks are dealt with appropriately.

The following workflow diagram details the future state of the onboarding process.

Client Onboarding - Figure 2

Client Onboarding as Competitive Advantage

The savings and positive effects on the customer experience realized by implementing an integrated Client Onboarding program more than justify the investment. Estimates vary greatly and are mostly dependent on the size of the firm, as well as variable client services, client profiles and account or product complexities.

Based on industry data, FSOs can reduce costs by 30-50% by implementing an automated, integrated onboarding solution. In an industry where gross margins are key to strong performance, reduction in the true cost of onboarding a client is a competitive advantage.

Depending on the source of research, the cost of acquiring new clients could be anywhere from 6-10 times the cost of retaining an existing client. The price sensitivity of existing satisfied clients is far less than new clients; happy existing customers are much more likely to refer the services of FSOs to people they know. Additionally, just as negative comments on Twitter, Facebook and other social media sites can be damaging, positive comments go a long way to improve the perception of the FSO as a trustworthy institution.

Besides cost reduction, integrated Client Onboarding enables FSOs to achieve the following objectives:

  • Enhanced Client Centricity: One-time capture of all client data helps to reduce the lead-time for document processing, thereby enabling swift transition from prospect to client. Access to multiple channels for application submission, product purchase and usage further improve the overall customer experience.
  • Increased Sales Opportunities: Automation of manual tasks, elimination of duplicate data re-entry, and transition from paper-based applications to electronic applications (such as e-signature and image capture for documents) help to streamline the workflow for account and product management. It also integrates the financial tools needed to generate proposals and creates the solutions to cover the depth and breadth of client servicing across asset classes.
  • Improved Governance and Risk Management: A common platform for verifying customer data collected from multiple channels streamlines data access across various business lines and departments. It improves the accuracy of data and makes processes transparent for prospect identity, financial profile and risk tolerance. Moreover, it reduces the overall risk exposure of the financial services firms through access to necessary compliance documentation and up-to-date custodial processes and forms.

About The Authors

Client Onboarding - Shishir Vadhavkar

Shishir Vadhavkar is a Director of Consulting at iGATE, with over 15 years of consulting and technology experience in the area of Wealth Management and Broker-Dealer. Shishir is committed to solving technology challenges faced by firms in this space and he has worked on various strategic and technology consulting engagements with top-tier US firms. Shishir has a MBA in Finance and Information Technology from Indian Institute of Lucknow, India.



Client Onboarding - Alissa McCaddin

Alissa McCaddin is a Lead Consultant at iGATE, with over 10 years of consulting and technology experience in the areas of Asset Management, Wealth Management and Legal. Alissa is committed to assisting companies implement business efficiencies and technology solutions for industry problems. She has worked on numerous engagements with top-tier US and International firms. Alissa has a BA in Sociology from Columbia University, Barnard College of New York, NY and a MBA in Business Strategy from Massachusetts Institute of Technology Sloan School of Management of Cambridge, MA.

Tags: , , , , , , , ,

Comments are closed.

%d bloggers like this: