Below is the article originally run on parallelmarkets.com updated for iCapital.
Investor onboarding is an essential process that helps a financial platform or a wealth management firm bring in a new client and build a long-term working relationship with them.
Traditionally, this process has been very resource-intensive and time-consuming, often spanning months at a time.
Fortunately, these manual processes are slowly being replaced with new technology.
This article will dive into what the investor onboarding process typically involves, what’s wrong with it and how it can be improved. We’ll even highlight how our innovative platform solves these problems.
This Article Contains: (Use the links below and jump to a specific section)
- What Is Investor Onboarding?
- What Is The Traditional Investor Onboarding Process?
- 3 Ways To Improve The Investor Onboarding Process
- Effortless Investor Onboarding At Your Fingertips
What Is Investor Onboarding?
Investor onboarding is the process of getting a new customer or investor started on your investment platform.
The investor or client onboarding process, which can sometimes span months, can be divided into the following steps:
- Initiate New Account Opening (NAO) Process
- Identifying an investor’s specific needs
- Regulatory checks and verifications
- Identifying and qualifying leads for potential investors
- Recommending financial products
This process is your client’s first impression of your firm and lays the foundation for a fruitful, long-term client relationship.
What Is The Traditional Investor Onboarding Process?
The traditional investor onboarding process is typically slow and inefficient. It often involves:
- Frequent back and forth email interactions over document requirements
- Tons of paperwork for both the investor and investment manager, wealth manager, or asset manager
- Multiple face-to-face meetings or phone calls
- Repetitive submissions of substantially similar documents
- Multiple verification confirmations
- Repeated follow-ups
As this information is collected, a fund manager, or other employees at various investment and wealth management platforms, spend a significant chunk of their time manually entering the collected investor data into their systems.
Once the platform collects this baseline set of investor and client data, it will begin a prolonged process of verifying and authenticating the validity of the data collected in compliance with rules issued by various regulatory agencies.
These regulatory compliance formalities include processes like Know Your Customer (KYC) and Anti-Money Laundering (AML) checks.
Typically, a firm is required to engage in a risk-based review of each new client onboarded, which means the approval process can be bespoke and time-consuming. It can be a particularly challenging phase for all parties involved with an often unpredictable timeline and validation process.
Additionally, the level of manual intervention required at each stage increases the chances of human error, thereby increasing the risk of non-compliance by the investment platform and severely increasing the strain on its team members.
As a result, the average investor or client onboarding process can take over a month and a half.
This leads to two major issues:
- Increased investor churn, where the investor drops out of the onboarding process altogether
- Massive delays in onboarding, which leads to missed investment opportunities and profits
Thankfully, there’s a way out of this.
3 Ways To Improve The Investor Onboarding Process
Here are the three aspects of overhauling your current process for a successful investor onboarding experience and maximum client satisfaction.
1. Simplify
We have surveyed investors and platforms about what aspects of the current process they find the most daunting.
The usual answers to this question revolve around the extensive information requirements, privacy concerns, and lack of clarity over what is required. Investors do not (and have no reason to) understand the history and rationale behind a platform’s onboarding checklist so that the entire process can seem unwieldy and invasive.
If you step into your investors’ shoes and think about the process from their point of view, you quickly realize the ease with which a person can become frustrated. After all, they constantly have to verify that they are who they say they are and can afford to send money for the investment project you are offering.
At iCapital, we are developing highly optimized investor onboarding flows that aggregate industry-wide standards in a simple format that features clarity around requirements, machine-readable information collection, and streamlined data validation.
This optimization of the client journey is beneficial for both the investor who experiences a much less frustrating process and the platform that can more efficiently validate the information necessary to onboard clients.
2. Communicate
Communication is essential to efficient client service and an overall great client experience.
Despite the most careful processing, designing, and planning, onboarding flows will inevitably lead to an occasional delay.
KYC verifications, asset transfers, and other validations are inherently complex procedures, which is why it’s best to keep investors and other stakeholders informed through every stage of the process.
Investors have paradoxically grown accustomed to a difficult and frustrating onboarding process.
You can set expectations and deliver a comparatively delightful investor experience with a few simple steps.
You can concisely explain the information requirements in a client onboarding checklist and how you’ve optimized it to reduce pain and friction.
You can also estimate the ‘lead time’ or the total time taken to finish the process from start to finish and identify various touchpoints and milestones that the investor has achieved in completing the process to know where they’re headed.
Use any wait time between milestones to check in with investors and educate them about your other products via webinars, newsletters, case studies, etc.
This can also be a good time to assess investor relations by gathering metrics that indicate levels of customer success, ask them to fill out a client questionnaire, or even kickstart a referral campaign for satisfied customers.
Maintaining transparent communication reduces lead time by enabling the investor to provide all necessary information the first time around and reduces the probability they will drop out of the process halfway through.
3. Digitize
Finally, your best bet at simplifying the process and communicating effectively is to digitize the onboarding experience.
How? An automated workflow reduces the potential for human error, automates information processing, and significantly reduces the need for endless manual interventions.
Here are some examples of how technology can enhance your onboarding process:
- Optical Character Recognition (OCR) to collect and prefill information on all documents
- E-signatures to streamline approvals
- Facial recognition and biometrics for verification and automatic logins
- Customer Relationship Management (CRM) tools to keep track of investor interactions
- Integrations with third-party tools for various functions
- Dashboards to track progress
Investment and wealth management platforms may not have the time and resources necessary to digitize every aspect of investor onboarding. Still, the automation of the most repetitive and redundant tasks will streamline large parts of the process.
Luckily, there is an easy onboarding solution to streamline your process.
KYC/AML Solutions: Effortless Investor Onboarding At Your Fingertips
iCapital includes an investor identification platform that enables financial services and institutions to validate investor credentials.
Our investor onboarding solution helps with:
- Beneficial ownership mapping
- Know Your Customer (KYC) checks
- Anti-Money Laundering (AML) checks
- Accredited Investor checks
Companies can integrate iCapital into their systems without any coding or programmatically via our API.
By integrating with iCapital, you can deliver a fully digitized customer experience to your investors, streamlined document collection, and identity verification. In addition, you can highlight how you are working to make their lives easier. Each investor onboarded via iCapital is issued an iCapital Investor Passport.
The iCapital Investor Passport is a secure, end-to-end investor identity that empowers the investor to leverage their previously provided and validated information across third parties. This reduces headaches and frictions for the investor, leading to a better experience for everyone.
The iCapital Investor Passport not only saves investors a ton of time and effort but also helps investment platforms in these ways:
- Reduces customer onboarding times by over 90% and compliance process cost by 60%
- Improves investor retention and decreases churn rates and errors in the information input process
- An iCapital Investor Passport can be integrated into your CRM and used to manage your investor records automatically
In Summary
It’s clear that banks, wealth management firms, and investment platforms cannot continue with the traditional investor onboarding process. It’s needlessly lengthy, heavily dependent on manual processes, lacks transparency, and is frustrating for all parties involved.
Thankfully, you can transform this painful process into a strategic advantage with iCapital through a single, simple integration.
Investors can use the iCapital Investor Passport across investment platforms to avoid repeating the same verification procedure. And employees and advisors can streamline and keep track of the onboarding process in a single place, all while improving client relationships.
Sign up with iCapital today to take your investor onboarding experience to the next level!
IMPORTANT INFORMATION
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