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Digitalisation in Wealth Management and Financial Advice – 3 Questions Every Wealth Management and Investment Advisory Firm Should Be Asking

Blog: Kofax - Smart Process automation

It’s a cliché, but nonetheless true: You never get a second chance to make a first impression. Opening a new account, or that “first mile of customer engagement,” has become one of the most crucial parts of the service offering in the world of banking and finance. It’s where a potential client can become a real client. Or not a client at all.

The investment advice and wealth management sector is not an exception to this industry trend, particularly as pressures mount from the expansion of robo-advice and D2C platforms. It’s often said that these business models are successful because investors—particularly the newer tech-savvy generation—don’t want to pay for financial advice. But often it’s simply because they have clear expectations about how long it should take to open an account. They demand the same fast, frictionless experience when investing that they demand when applying for a mortgage or insurance policy, or opening a bank or credit card account.Digitalisation in Wealth Management and Financial Advice (1)

Time-to-revenue is what it’s all about—for you and your clients. The faster clients are onboarded and assets are processed or transferred, the faster income can be generated for you and your firm, and the faster the funds are in the market generating returns for your investor. This is where a digital, omnichannel strategy can provide tremendous benefit.

Let’s take a look at three key questions to keep front-of-mind when evaluating the strength of your firm’s onboarding process:

  1. The “Shop Window”: How is it Reflecting on Your Business?

For quite some time, the industry has focused on compliance governance and back-end processing, such as TCF, best execution, open-architecture access, in-specie asset transfer and portfolio management.  These are important, of course, but they are services that are only needed after the investor has made the decision to become a client or to invest. They don’t help your firm win more business or drive efficiencies.

According to research, it currently takes an average of 41 days to onboard a high-net worth client; that’s well over a month from that first interaction between an adviser and a potential client. It’s time to look at the client-facing front end—‘the shop window’—which is when an adviser/firm sits down with a potential client for the first time, and the processes that can make or break a new relationship from that point.

Process efficiency is key; in fact, it’s one of the primary reasons why a wealth manager, an IFA or a platform will win or lose a new client and why digital firms are flying ahead with online applications and automated advice. Digital technology can help automate those laborious, time-consuming front-end processes (e.g., data collection, data entry and AML checks) and ensure investors commit faster. The benefits are clear: Aite Group recently reported in a survey of U.S. wealth and adviser firms that 38% of digitally enabled firms reported revenue growth of 10% or greater over their non-digital counterparts.

  1. The Speed of Paper: Is Your Business Running Behind?

Many would argue that given the uncertainty in the current investment environment, there is a greater need for financial advice, not less. However, this does not mean your firm has the advantage. Because no matter how skilled your advisers are and no matter how well the first meeting went, control over winning the lifetime business of a client is lost as soon as that initial meeting ends.  This is because your firm is governed by the onboarding process you have in place. Paper, snail mail and error-prone, manual processes typically kick into gear for identity verification and anti-money laundering (AML) checks. Often, data is manually typed into different systems multiple times, and the client may be asked repeatedly for additional information, which must then be scanned and emailed—or even worse, the client may be asked to schedule another appointment so that the information can be verified or handed over.

It’s an understatement that impatient investors and this type of paper-based process are not a winning combination. If the process isn’t omnichannel, intuitive and streamlined, investors are far more likely to abandon it; in fact, 68% of finance firms report losing deals, clients and revenue due to problems in their processes.

  1. The Numbers Don’t Lie: Is Your Firm Missing Out on Revenue?

Consider the following scenario:

A wealth management or advisory firm charges using a recurring bps (basis point) structure and aims to onboard 500 clients (individuals or corporations) per year. With the “to-ing” and “fro-ing” of meetings, form filling, Know Your Customer (KYC)/AML checks and the manual process of getting information from paper format into the firm’s internal systems, the process takes four weeks. This amounts to more than 2,000 weeks of missed fees/charges per year, or to put that into a different context, 41 years’ worth of lost charges per year, every year.

This is a considerable loss, made worse because the wealth management and advice sector is a fiercely competitive environment where every day counts. By using technology, the length of time it takes to complete the onboarding process can be cut in half; this is a massive gain in revenue for firms. And it’s likely you could see an increase in the number of new clients going forward, while keeping your existing ones happy, due to the enhanced, fast customer experience you offer.

We provide you digital client onboarding technology to help automate this process. Feel free to call me on 07918 693063 to discuss this in more detail, or download this free white paper Harnessing the Power of Digital in Wealth Management Client Onboarding.

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