- Wealth managers are just beginning to digitize their client onboarding process. Digitizing each element of the process can increase advisor efficiency, improve client satisfaction, and establish a solid foundation for a robust ongoing relationship
- Examining implementations of digital capabilities across the onboarding value chain shows the benefits of investing in technology upgrades
- Wealth managers of all stripes should examine their client onboarding process, as improved onboarding processes can lead to significant revenue upside and advisor-client satisfaction
- Assess where you are today
- Determine the areas of greatest leverage
- Begin to execute tactically while keeping the long-term strategy in mind
Tobias (00:07):
Thank you all for staying through and we have got another great session for you right now about digitizing for impact, putting the wealth management client at the Center of Client Onboarding. I wanted to introduce our next speaker. Ashley Longabaugh is a Research Principal of Celent Wealth Management practice. She is based out of the New York office. She joined Celent in 2013 from the London office. Previously she had been with Credit Suisse Asset Management, like SOAR Asset Management and UBS Wealth Management. She is a prolific author quoted in numerous trade publications including the Wall Street Journal and CNBC among others. Please everyone give a warm welcome to Ashley Longabaugh.
Ashley Longabaugh (00:59):
Thank you.
Ashley Longabaugh (01:02):
Wonderful. Thank you Tobias. And hi everybody. Thanks for joining me. I am Ashley Longabaugh, Research Principal for Celent Wealth Management Practice. I am delighted to be a part the Invest Conference with the opportunity to present some of my research on client onboarding. So Celent, lets see if I can coordinate slides.
Ashley Longabaugh (01:28):
There we go.
Ashley Longabaugh (01:29):
Okay, so here we are. So Celent is a research and consulting firm. You may or may not be familiar with us, but we specifically look at Technology as an enabler of innovation across the Financial Services Industry. We are also a part of the Oliver Wyman Family, Marsh McLennan and Mercer, and we have analysts located across the globe. Our agenda for today.
(01:57)
So before we dive into the topic of onboarding, I think it is important to note that this topic and the functionality itself is against the backdrop of a new era of financial services. So first, the way that we invest, think through Direct Indexing, Fractional Trading, Zero Commissions, what we are investing in like Crypto alternatives, Sustainable Products and Companies and how we do it through self-directed channel. Hybrid or full execution are really challenging the industry to evolve. Secondly, there's a change in the core client base, an overused, but good term, I am sure you are all familiar with it, the democratization of wealth management and to a certain extent the convergence of asset management with wealth management and wealth management with banking products and services. And that is also alongside the demand for personalization and combine. Those are really a dominating narrative of the industry at the moment. And then lastly, these tectonic shifts are underpinned by the proliferation of data and the implementation of modernized technology, which is facilitating all of the key buzzwords, connectivity, operational efficiencies, transparency and scalability.
(03:18)
So today's process, client onboarding process, it's fragmented, it's underpinned by manual disconnected paper-based processes. The Technology has really shifted from back office investments to front office advisor enable enablement, which also includes client onboarding. So client onboarding, it's a seemingly intuitive process. It should be straightforward. It's also the first meaningful interaction between an advisor and a client. But client onboarding is still a real challenge for clients, advisors, and employees. And we'll talk about some of the reasons why and then how to go about maybe fixing it or just moving forward. So the front end has become more digital. I mean we all see the glossy front office, but there is a lack of seamless data relay to the back end. There are significant redundancies if you think about data entry. And that again is from the front end all the way through the backend, through KYC and a lack of process transparency.
(04:21)
Think about sign-offs or approval status in that onboarding process. Secondly, advisor and client reliance on technology is the new norm. The pandemic, of course, we've all experienced it both professionally and personally. There is just an absolute shift towards remote communications, digital channels, and the reliance on tech in our everyday life. And that is an absolute step change for advisors and client expectations. Post-crisis expectations for personalized, digitized, user-friendly onboarding and client journey are compounded by the client experience in adjacent industries. So if you think about your experience with Amazon or Netflix, it's usually a one click experience and they probably know you better than you might know yourself. But wealth managers are also seeking a higher level of automation of services and central storage of data throughout the onboarding process. And advisors and clients are also facing limitations around the ease of use due to regulatory concerns, cost, operational efficiencies and scalability.
(05:34)
So there are some significant pain points towards adopting a fully successful onboarding process. So first, one of the biggest hindrances to the client onboarding process is looking myopically at it or as an isolated function. I think a wealth manager really does actually need to take a step back and fully understand all the processes and then create that optimal first rather than playing around with the individual elements of it because while they are discreet, they are also inextricably linked and they're better looked at as a cohesive system. Secondly, the intergenerational wealth transfer, again, we are all familiar with it. Estimates are around $50 trillion. It's in motion as you know, have all experienced. I am sure there are a lot of individuals now who are looking for wealth management services, but importantly, they're also looking for those services in non-traditional ways. So as opposed to only referrals, it's more self-directed.
(06:33)
Now it's online. And so wealth services really need to reflect this new era of client behavior. Thirdly, a shift in mindsets. So creating that true hybrid touch high tech solution presents challenges across that client advisor employee journey because that digital adoption is not fully there yet. And I think the hesitancy is actually more on the wealth manager side rather than the individual side. It's the mindset that it's always been done. This, I can see that there are benefits to adopting new technology, but I don't want to learn it. And that is particularly true in certain areas of wealth management and also in more traditional geographies of wealth management too. So regulation, again, this continues I guess. Legislation itself of course continues to evolve and that is particularly true with an increase in client base that becomes more international and as new asset classes emerge to. So there's a lack of prescribed standards that has led to a misinterpretation of risk assessment and it's created an over complication of the KYC AML and sanctions process.
(07:42)
The amount of data that is required of firms to capture store and update regularly just to comply with regulation is significant and it's also creating operational inefficiencies and risk. So transparency data and data validation across the onboarding process are critical, but they're still, again, largely paper intensive. And then finally, data management strategies. This is a big one. Personalization is key to improving the client experience. And wealth managers of all stripes are realizing the increased value in all forms of client data capture and analytics as the client experience as those expectations rise. So wealth managers competitive advantages increasingly I guess driven by their ability to harness and monetize internal and external data. And so you're seeing more products that are data driven that are also encompassing robust data management strategies, data science and analytics, the application of AI ML and of course LLM being part a very large part of the conversation now too.
(08:51)
And when you think about the role of data management strategies within client onboarding, it of course has a very profound effect. And one other thing I think to note around data management strategies. While I think folks are very focused on the potential transformative power of chat GPT for example, I think data protection, data harvesting, data privacy will really be the next rollout in terms of regulations. So wealth managers would be wise to start thinking about the policies that they have in place there. So I am actually going to pause here for a minute and just see if anybody wants to share their onboarding experience either from a wealth management client perspective themselves or from an advisor or employee perspective.
(09:38)
All right, so when you look at the onboarding process value chain, you can see that it touches across. You can see that it touches across front, middle, and back office functionalities. So the connectivity, the tight integration between each function to support that flow of data that we talked about initially is really critical. But so is the flexibility of the overall system to support advisor, client optionality and hybrid servicing. So as you all know, today's advisor is serving a range of clients across the wealth spectrum, across demographics. Again, that democratization of wealth is real and the onboarding experience needs to accommodate the different servicing levels of wealth management. So whether that is execution only or white glove private banking and giving clients the ability to start their onboarding journey across that continuum as they sort of dip in or dip out as they move across the continuum, that continuum themselves, a wealth manager should also consider redesign the client onboarding process from a holistic client lifecycle management perspective rather than as a siloed point solution. So by creating an optimal workflow, first using design-led thinking that leverages modern technologies to enable those deep functionalities, that will play into the competitive advantage as well. So I think it's important to highlight that digital onboarding is more than just digitizing paper forms. And I think the value chain here that I've created, I think you can see how it touches upon the entire value chain across the organization.
(11:22)
So sort of a high level slide, but I think it's important to say that successful client onboarding does achieve the longevity of a relationship, high user engagement and a low churn rate. The investment and upgrades to onboarding KYC and implementation processes are moving from a cost lens to focus on the client experience and revenue upside. So how do we get there? So I think if we take a look at where firms are investing in their onboarding functionalities, there are a few key points to consider. Of course, this is an illustrative list, so by no means is it conclusive, but CRM for example, should be at the core of client onboarding. The intersection and integration of data and data platforms within an organization is a huge opportunity. So the amount of data that exists today is astounding as we all know. There's an interesting statistic that says 90% of today's data was created in the last two to three years.
(12:28)
So that is amazing when you think about it. Again, the ability to harness structured but also unstructured data is again going to lead to that competitive competitive advantage. Secondly, open architectures, I don't think that is new to anybody really, but enabling that connectivity, the automation enabling personalization where you can of course discover and evaluate new FinTech offerings, for example, CLM client lifecycle management, the automation there and pre-client portals mainly delivered through cloud solutions. But really understanding the type of wealth management firm that you are and what works best with the systems that you currently have. Low-code technology, API, analytics and integration capabilities, those are all part of the sort of tech I think that can move client onboarding forward into more of the future than where we are now. And then finally, deep functionality that provides holistic CLM. So focusing on integrated solutions that provide holistic front to back again rather than those siloed products through the client lifecycle.
(13:38)
So firms are expanding the number of functions that can be carried out by a client. The functionality is therefore deeper and broader. One example is a client goes to open a product while still having the option to self-refer an advisor when it comes to a more complex product. So back to that value chain, and I'll go pretty high level across these to not bore you, but you can always talk to me afterwards or email if you're interested. But if you dissect each element of the onboarding process while bearing in mind it's connectivity to the entire value chain, there are some key observations. So for example, at the prospecting function, traditional channels and methods of interactions are still being used. And of course there is the balance in wealth management, which is completely a relationship driven industry. So balancing the in-person communication with the tech that we have now and sort of mitigating a lot of the slow or error prone onboarding experiences that have come out of the paper-based disconnected experience that we are talking about here.
(14:46)
Again, with the rise of mobile clients prefer to interact messaging, digital signatures, et cetera. There's also a lot of regulatory challenges that result immediately from that. So some of the successful platforms that are out there sort of dealing with the prospecting function right now, you can see an example there from Moxo dashboards with actionable data driven insights to help client segmentation. Also identifying growth opportunities or combining workflow and digital automation capabilities. So that would be the structured interaction with the collaboration capabilities, and that would be the unstructured interaction at the information gathering stage. I think this can probably be best summarized as the swivel chair syndrome that everyone talks about. But at this level, I think seeing evolving investor portals from a simple one-way data display for clients to collect information into a two-way sort of bi-directional data and document exchange facility is leading the pack there. Sorry, wasn't on the right slide. An integrated help experience. If you think about secure messaging, digital collaboration, digital verification for example, that provides that seamless connectivity across virtual assistants, for example, and chat for improved resolution time. And then also the ability to pre-fill account data from an advisor CRM or the planning tool to reduce the need for manual data entry. So I'll just pause there for a minute. I was a bit slow getting to that slide.
(16:32)
At the suitability function, there is this expectation that tech can really revolutionize the onboarding journey and workflows the identity verification or KYC AML data will be electronically extracted without the need for form completion or document upload. In looking at a lot of the platforms that are out there, either from a front to back perspective or just completely an onboarding type platform, a strong platform does carry that data through from a previous stage supplemented by advisor input, and then the platform performs all the KYC checks and then sends alerts on outstanding items, allowing the delegation of tasks among the advisory team at the account opening stage. There is a lack of visibility into internal processes and an inability to plan resources. So think coordinating with internal IT teams, and this is partly because of the size of the data collection exercise at this function, it's also thes single biggest ID paper requirement stage. So things like copying passports or driving driver's licenses, and then also from the advisor side, paper production by the advisor proposals, quotes, things like that. So I think it does need to be said that the aspiration for client onboarding is to enter data once and only once a centralized data repository, for example, that maps and normalizes all client data into a single location, unifying data from different and complex sources and creating actionable insights.
(18:16)
So for reporting risk and audit, etcetera. I've grouped these all into one just for the sake of time, and so you don't see the same slide nine times or so. But I think important to note here is that orchestrating the growing number of RegTech solutions is a challenge document collaboration tools through to biometric ID services or text recognition software, automated politically exposed person checks, media screeners, things like that. A lot of the larger wealth managers have gone well beyond those types of capabilities by onboarding AI driven services that drill down on relationship networks and uncover potential bad actors or by using natural language processing to search media outlets and news sources and things like that. So what does it look like in real life?
(19:11)
I think I just threw a lot of words out there at you. So to put it all into something more tangible into context, I guess some more words, but wealth managers are rewriting platforms and processes that have existed for decades to really focus on the advisor and client efficiency and satisfaction. Partnerships, I think are incredibly important, whether that is internal or external, leveraging the tech that is already there, of course an integration becomes a really big key focus for you that is critical to creating the modernized products and services that mirror the client experience in adjacent industries that we spoke about earlier. So APIs, data agnostic tech stacks are tools to facilitate the consolidation, sharing and aggregation of data across the enterprise. So just a few key examples here. Merrill Lynch recently launched their Kobe platform collaborative onboarding experience. I actually wrote a case study about it if you're interested in just taking a deeper dive on it.
(20:12)
But essentially it's an end-to-end digital account opening platform that enables Merrill Financial Advisors to collaborate digitally with their clients. But I think what kind of stood out was that you could open an account, you could open multiple accounts in one guided workflow. So from the bank side or even the brokerage side, Merrill Advisor Match is another example that is a new research based digital platform for connecting investors, seeking financial advice with an advisor. So if you think dating app, that is very similar to this, and I thought that was pretty cool. And then Morgan Stanley, their eye advisor, you might be familiar with it, but that enables advisors to efficiently pull the correct data that they need before client meetings, update during the meeting, and then have the takeaways afterwards. Morgan Stanley and also recently JP Morgan are some of the early adopters within wealth management of Chat GPT. So whether that is creating an internal facing chatbot or big caveat around regulation in terms of stock picking, but I think the opportunity's absolutely there.
(21:29)
Plaid is another good example. You might know them from well, data aggregation and API connectivity, but their strength has always been at the backend of the onboarding process. So making the account useful for the customer. So with the addition of kognito's capabilities and the launch of their identity verification and monitor products, Plaid is actually moving into the early stages of customer onboarding and then offers a complete verification a ML and KYC compliance solution. And Plaid actually estimates that 90% of their customers need some level of a KYC solution. And one more example for you is InvestCloud, they, well, let me back up. So traditional onboarding looks only at a moment in time. It's often for a very narrow scope. InvestCloud has invested a lot in sort of the onboarding and front office capabilities, specifically around reboarding. So that facilitates the client data entry through behavioral science. It decreases operational costs and create and creates personalized services. The traditional, and in many cases still current view of client onboarding is narrow and it's seen as a one-time occurrence rather than an end-to-end journey. So InvestCloud approaches onboarding through that comprehensive lens onboarding for them is viewed as a combination of initial onboarding, but then as a series of touch points throughout the client life, which does consider the dynamic nature of a client's life and associated events.
(23:17)
So just looking forward some key elements to consider. I think firms should really address client onboarding as providing true client lifecycle management and CRM to clients and also advisors. I can't stress enough not just as a siloed point solution, it's really part of the holistic client lifecycle. Next gen advisors, I think we talk a lot about next gen clients. Next gen are incredibly important obviously to the industry as well. There's been a huge shift of advisors from the larger broker dealers to the independent channel for several reasons, but tech is one of those reasons. They do seek sophisticated desktops and workspaces that are, again, all the buzzwords, scalable, flexible, robust.
(24:08)
I would also say incorporating third party systems in the onboarding process to perform certain specialist functions has an important role to play toward improving that client onboarding process. How advisors want to work with their clients by developing modular components that can seem seamlessly integrated. And then two other final points really, I think implementing various sub portals like narrative based storytelling or collaborative visualizations, AI and data-driven recommendations, persona based solutions and pre-client portals, again, using behavioral science. And then finally back to legislation, those legislative requirements will evolve and the amount of data that individuals are generating and then also that regulation will require as well, will only increase. So cybersecurity is different from data protection and data privacy, but I think those two worlds are going to become incredibly important, particularly when we are looking at client onboarding. So that is the presentation I have for you today on digital client onboarding. Feel free to shoot me an email afterwards if you have any questions or if you want to ask me a question now, that would work too. So thank you so much for your time.