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Navigating the Future of KYC and Onboarding in Asset Servicing

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The asset servicing landscape is undergoing a period of significant transformation, driven by evolving regulations, heightened client and investor expectations, and the imperative for greater operational efficiency. Recently, Fenergo hosted a webinar delving into the findings of our latest research report "Benchmarking KYC: Data-Driven Insights for Asset Servicers”. This session brought together industry experts to discuss the key challenges and opportunities facing asset servicers. Our panel included:

  • Aoife Doyle - VP of Product Marketing, Fenergo
  • Annabelle Jules - Executive Director of Risk and Compliance, Vistra
  • Arjan Ligtenberg - Sector Head of Asset Management, Wealth Management & Private Equity, Cognizant
  • Andrew Hutchings - Associate Publisher, Asset Servicing Times [Moderator]

The following blog post provides a recap of the insights shared during the webinar.

The Burden of Inefficient Processes

A central theme of the webinar was the significant drain that manual and outdated know your customer (KYC), onboarding and transaction monitoring processes continue to be at asset servicing firms.

The results from Fenergo’s survey of over 300 C-Level executives in Tier One asset servicing firms reveals that over three-quarters (79%) of firms cite manual processes as their biggest inhibitor to achieving operational efficiency. Additionally, 93% reported fragmented data, workflows and systems as a major challenge.

The panelists discussed how legacy systems and spreadsheets are still being used for onboarding and managing investor relationships. According to Annabelle Jules, before Vistra implemented Fenergo, its KYC and onboarding processes involved the “overuse of emails and spreadsheets using various onboarding forms and periodic review forms, which ultimately, clients don’t necessarily respond well to”.

These labor-intensive processes have a dual impact – effecting client and investor experiences as well as driving up costs. Aoife Doyle noted, “if you have a very laborious KYC review process with repeated outreach through the same data by multiple teams, you are not only driving up your internal costs, but you are having a knock-on impact to your downstream investor and your clients experience as well”.

She went on to add, “in the very margin-driven business that asset servicing is, those costs and client experiences go hand and hand with each other. You want to deliver an optimized client experience and optimized investor experience, but you want to do so at a realistic cost".

Navigating the Maze of Rising Regulatory Complexity

The webinar also addressed the ever-increasing web of global regulations that asset servicers must navigate. From the 6th Anti-Money Laundering Directive (AMLD6) and Markets in Crypto Assets Regulation (MiCAR) in the EU, to the Economic Crime and Corporate Transparency (ECCT) Act in the UK and upcoming FinCEN rules in the US, the regulatory burden is substantial and constantly evolving. Our research indicates that a significant portion of firms are struggling to keep pace, with nearly seven in ten (69%) admitting their systems are unable to fully adapt to new regulatory changes.

The panelists all agreed that technology is essential for firms to handle this regulatory burden. According to Annabelle Jules, "if you don't have technology to support you, the only option that you have is to upscale and increase the size of your teams.”

Annabelle went on to discuss how Fenergo has helped her team at Vistra: 

“We're able to use Fenergo’s policy rules engine and what's great is that as rules and regulations are changing, we're able to update our policy rules engine to derive the logic as to what the requirements are. This helps us take away some of the low complexity work from our existing analysts and gets them to focus on the more complex ones.”

Meeting Evolving Investor Expectations and Mitigating Churn

Perhaps one of the most critical takeaways from the webinar was the evolving expectations of investors themselves. In today's digital age, investors demand a seamless and efficient experience. Fenergo’s research revealed that a staggering 41% of firms have lost a client due to slow and inefficient investor onboarding processes. The top reasons causing clients and investors to leave are: a lack of technology adoption/innovation, the inability to deliver on reporting requirements, and delays in the time taken to be fully onboarded.

Ultimately, the research strongly indicates that in today's environment, a seamless digital experience is not a luxury but a necessity for investor retention and growth.

Arjan Ligtenberg stated, "if a client’s experience starts as a negative one and then the organization makes some other mistakes, it will increase the likelihood of that clients to leave and go somewhere else - so every single experience matters.” 

He added, “our clients’ expectations are for us and the firms that we work with to stay ahead of the bad actors and the technology that they use. And that's exactly what Fenergo also helps with is to bridge that gap." 

The Transformative Power of Automation

The webinar discussion highlighted automation as the key to overcoming these challenges and achieving business growth. By strategically implementing technologies such as Artificial Intelligence (AI), Machine Learning (ML), and end-to-end Client Lifecycle Management (CLM) systems, asset servicers can significantly streamline their operations.

However, Fenergo’s survey revealed that only 6% of asset servicing firms have automated more than half of their onboarding processes.

While our research shows that many asset servicers are still burdened by manual and labor-intensive processes, leading to operational inefficiencies and investor frustration, the path forward lies in embracing automation.

According to Arjan Ligtenberg, “AI is the hot shiny topic right now, similar to what Blockchain was in the mid-2000s. Think the biggest question is: how do we protect our customers and then how do we give our customers the best client experience possible?”

Aoife Doyle added, “Fenergo’s look at AI as part of a wider solution to fix a particular area, for example reading and extracting data from documentation, enriching the investor profile in a more automated way rather than having someone read from one page and type into another”.

By strategically implementing technologies like AI, ML, and end-to-end CLM systems, firms can significantly reduce onboarding times, streamline KYC reviews, and enhance the overall client and investor experience. Ultimately this enables firms to deliver the seamless digital experience that investors increasingly demand and gaining a competitive edge in the market.

Conclusion

The insights shared during Fenergo’s webinar paint a clear picture: asset servicing firms must embrace technology to navigate the complexities of the modern financial landscape. 

By moving away from outdated manual processes and adopting intelligent automation solutions, firms can not only enhance their operational efficiency and meet ever-evolving regulatory demands but also deliver the seamless digital experience that today’s investors expect. Those who proactively invest in technology will be best positioned to thrive, retain clients, and gain a significant competitive advantage in the years to come.

To learn more about how Fenergo’s Client Lifecycle Management solutions can empower your firm, we invite you to request a demo. You can download Fenergo’s report, Benchmarking KYC: Data-Driven Insights for Asset Servicers, to access all of the survey findings.