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Transforming Investor Onboarding for Asset Managers

Last week, Fenergo and FIMA came together to host an expert panel discussion around the challenges and future of investor onboarding in the Asset Management space. 

Our panel included: 

  • Jay Krish - Head of Data Governance for Financial Crimes Compliance, State Street  (The views that I expressed here are of my personal opinion and are not intended to speak on behalf of State Street Bank and Trust or its legal entities.)
  • Cindy Castellano, CFA - CEO, Cutter Associates 
  • Terry Flynn - Managing Director, Asset Management, Fenergo 
  • Ryan Portela - Program Director, FIMA Events (moderator) 

The full webinar is available to watch on-demand, but we’ve summarised some of the key insights from our panel of experts below.  

The Onboarding Challenges in Asset Management 

Our panel opened the session by introducing, at a high level, some of the challenges and impediments to effective investor onboarding. The first challenge that was highlighted surrounded the extremely manual nature of the processes and methods utilized to manage investor onboarding and ongoing lifecycle management. 

Such manual activities are leading to various issues within Asset Management firms’ investor onboarding operations, including disconnected, siloed teams, a lack of transparency by stakeholders into the onboarding status and the manual rekeying of data across multiple systems. 

As a direct result of the above issues, investors looking to establish a relationship with Asset Management firms are seeing an average onboarding delay of up to 30 days. Terry noted that lengthy onboarding times utilizing siloed processes can result in an onboarding process more prone to human-error which, in turn, can lengthen investor onboarding delays further if mistakes need to be corrected. 

Ultimately, the most direct consequence of this is a negative investor experience, particularly against the backdrop of a digital-savvy generation of investors who expect efficient, digital processes. 

Jay echoed concerns regarding the investor experience and included regulatory compliance and legacy technology landscapes as added challenges, which were discussed in greater detail throughout the webinar. 

Navigating Compliance and Regulatory Fines 

The increasing SEC fines for non-compliance in areas like AML and ESG highlight the pressing need for proactive compliance management. Asset management firms must stay ahead of regulatory changes and ensure their processes are robust enough to mitigate compliance risks. 

Technology as an Enabler 

The industry universally agrees on the potential for technology to significantly enhance the efficiency and effectiveness of investor onboarding and ongoing compliance and operational management. However, there is still an air of low confidence amongst Asset Management firms in how to implement technology most effectively. Our panel explored some of the visionary benefits as well as cautioning against some of the pitfalls in defining a target operating model to include technology. 

Digital technology solutions can go a long way towards addressing the concerns outlined in the opening discussion, including internal manual processes and the investor experience. By leveraging automation, Asset Management firms stand to reduce or indeed eliminate human-error. This not only results in more efficient investor onboarding, but also stands to improve compliance operations, by digitalizing policies such that human interpretation and decision-making is only required by exception. 

However, our panel stressed the need for a nuanced approach to technology adoption. Jay noted the importance of implementing these newer technologies in such a way that is human-centric, considers the integration costs and the existing processes that have been established over the years. 

Overcoming the Hurdles of Data and Legacy Systems 

One of the most significant challenges discussed was the presence of data silos and outdated legacy systems. Cindy highlighted the important of mastering data correctly during the initial investor onboarding process, noting that this comprised of investor, account and product data sourced both from the investor as well as internally generated data. This data is essential not only for the onboarding process but also for various other functions like setting up accounting systems, performance systems, and trading platforms for investors. Cindy further noted that the tendency within asset management firms to attempt to master this data in Customer Relationship Management (CRM) systems was ineffective and inefficient, with CRM being a consumer, not a master of investor data. 

Our panel echoed these thoughts, advising that Asset Management firms should consider effective data management and mastering beyond investor onboarding, taking into account:  

  1. The entire lifecycle of the investor beyond initial onboarding 
  2. The ‘touchpoints’ of that data within the internal organization. 

Best Practices for Incorporating New Technologies into Existing Technology Ecosystems 

Digital solution onboarding should be seen as a transformational journey rather than a one-time project. Firms who bring in new technologies only to replicate existing processes on a new system are setting themselves up for failure. Implementing a new digital strategy, or extending one that is already in-motion, is an opportunity to improve processes. 

However, it is important to acknowledge that, for some firms, transitioning from an operating model which revolves around “Excel and SharePoint” to one which seeks to digitalize and automate investor onboarding through technology can be a significant mental leap. Asset Management firms should seek out the consultative advice of specialized, experienced technology providers/vendors and lean on their expertise to coach them through this transition. 

The First Impression Counts 

The initial investor onboarding experience is critical – this first touchpoint indicates to investors what it’s going to be like to do business. A positive first interaction can significantly reduce abandonment rates and foster long-term relationships, especially in digital and wealth management contexts. Cindy articulated: ‘If you’re simple to do business with, you’re timely in your response, you make it easy for them (investors) to give and retrieve information, that makes your life pretty easy’.  

Looking Ahead: Advice for Asset Management Firms 

Embrace Technology Thoughtfully: While adopting new technologies, it's essential to focus on the human element. Ensure that technology serves to enhance, not replace, human interactions and decision-making. 

Data Mastery is Key: Develop a clear strategy for managing and integrating data across all aspects of the investor lifecycle. This will improve efficiency and decision-making. 

Focus on the Investor Experience: Simplify and streamline the onboarding process. A positive initial experience can set the tone for a long-term investor relationship. 

Stay Compliant and Agile: Keep abreast of regulatory changes and be agile in adapting processes to remain compliant. This proactive approach is critical in avoiding penalties and maintaining trust. 

Cultivate a Forward-Thinking Mindset: Treat technology adoption and process improvements as ongoing journeys. Staying ahead in a competitive industry requires a mindset that embraces continuous change and innovation. 

By focusing on these strategies, Asset Management firms can not only overcome current challenges but also position themselves for success in the rapidly evolving financial landscape.