Jun 09, 2021

First off, congratulations! You and your team worked extremely hard these past six months. After multiple emails, phone calls, late-night dinners, and a few poorly played rounds of golf, you’ve finally landed that $50 million client you’ve been courting.

After a few pats on the back and a celebratory “whoop” from the office staff, the realization sets in: You’ll now need to onboard multiple accounts and entities with varied registrations to your bank, transfer the assets in kind because the client was fully invested, and complete a financial plan from scratch. Because you understand the importance of a successful onboarding, you’re feeling a level of stress ─ and recall how your last one took weeks to complete. While he knows you well, the new client isn’t familiar with your team or the bank, and the onboarding represents his first experience working with your firm. Of course, you want to get it right the first time!

You’re in the process of instructing your firm’s client associate to send a welcome package to your new client. You set the wheels in motion ─ instructing compliance, the back office, and the C-level that all necessary resources need to go into getting this client onboarded quickly and successfully. After all the effort you’ve invested, you want to provide your client with the ultimate VIP experience during this crucial stage of the relationship.

All appears to be going well until a few days later when the phone rings … with a dreaded call from compliance. It turns out that while your new client is a gentleman of stature in the local community, the original source of his wealth, obtained via an inheritance from his recently deceased father, may have been obtained illicitly.

Naturally, the bank’s concerned about the potential money laundering implications and now is considering denying the client. All those working hours, the subpar golf rounds, the ill-expensed restaurant bills are now potentially for naught. The relationship you cultivated and nurtured for six months, the trust you built, the promises you made ─ all in vain! This story is not anecdotal. Although some details have been changed for anonymity and confidentiality purposes, it’s a real-world example of a client onboarding that took place not long ago in today’s strict regulatory environment. The anti-money laundering/know your client (KYC) processes typically involve multiple teams and, depending on the complexity of the client, can be an onerous affair that drags on for weeks, if they’re not digitized.

For a high-risk client, this can mean that considerable resources go into prospecting and onboarding with no guaranteed return on investment. The good news is that digital tools are available today that can come in handy, and some of these technology solutions provide a good tie-in throughout various parts of the client lifecycle.

How exactly can digitizing the prospecting and onboarding processes help avoid such a scenario as described above?

For starters, today’s digital tools give a firm’s advisors transparency from day one regarding any prospect. Specific vendors provide know your prospect (KYP) tools that enable early compliance screenings based on limited prospecting information. Other solutions seamlessly integrate with one or more KYC vendors to render a decision in minutes or assist with prepopulating custodian account opening forms to expedite the process once it is approved.

We’ll cover all this and more in our upcoming research paper, Digital Client Onboarding: The Next Frontier in Wealth Managers’ Digital Transformation? ─ providing you with insights into the status quo of digital onboarding in wealth management. We’ll also profile several vendors that supply onboarding solutions specific to wealth management firms, and discuss the opportunities, challenges, and success stories of their implementations. Lastly, we’ll outline the best practices for firms with plans to implement a digital client onboarding and client lifecycle management experience.

Want more information about this topic or Cutter membership? Contact us at [email protected].

Howard Corey has more than 15 years of financial services industry experience. He joined Cutter Associates in 2021 as a Senior Research Analyst. His broad experience in both wealth and asset management includes client services, portfolio operations, multi-asset class trade execution, and client performance reporting.

Anna Schneider researches and analyzes market data, conceptualizes and writes research reports, and presents research to relevant networks in international settings. Anna is focused on researching the Asian wealth management landscape. She is especially focused on the China’s financial services sector, including how it is impacted by disruptive technological, economic, legal, and regulatory developments, and the related implications for wealth management industries worldwide.