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For both the buy sides and sell sides, onboarding has remained a
manual, ad hoc process. While other operational areas have
benefited from next-generation technologies, onboarding teams on
both sides have continued to rely for the most part on email and
spreadsheets.
But as global finance has become more complex and uncertain, the
cracks in an overburdened process have widened. Trends such as the
continued rollout of derivatives, global tax reforms, more rigorous
KYC requirements and greater risk and compliance activities have
stretched onboarding teams to breaking point.
For the sell side, the incentives for getting the process right
have never been greater, as onboarding speed and responsiveness has
become a factor that directly influences the buy side's decision to
work with a specific counterparty. But what is the best way to
remediate and accelerate sell side onboarding?
Through bilateral conversations across both the buy side and
sell side, SIFMA Asset Management Group and IHS Markit explored the
challenges banks and brokers face and identified best practices
that are helping them enhance onboarding speed and efficiency
without compromising diligence.
Create a single point of contact
Perhaps the single most important change that sell-side
participants can make to their process, establishing a single point
of contact for the client significantly accelerates onboarding
speed and enhances the client experience.
Counterparties that task multiple teams such as KYC, tax, legal
and regulatory with contacting clients, either directly or through
a sales team, create time-consuming and uncoordinated systems,
placing undue strain on both the client and the organization. When
clients are contacted by multiple people making different (and
sometimes overlapping) requests, it creates confusion, delays and
distrust. Additionally, when the responsibility for data collection
is distributed across multiple people or teams—or, in some
cases, even offshored—no one feels directly responsible for
maintaining the quality of the client relationship.
Providing a central onboarding team—ideally, one in the same
area and time zone—creates consistency, continuity and a closer
rapport with the client. This not only improves the client
experience, it also makes clients more likely to provide
information.
Recognize the value of data sharing
One of the most effective changes sell-side onboarding teams can
make is to be bolder about asking for client data. This may be a
controversial approach, as clients can be very protective of their
company's data, but the longer it takes to collect the data, the
longer the onboarding process will take. Ideally, the conversation
about data sharing should examine the overall need at the
operational level, with the goal of broadening those categories
universally. This is more effective than initiating a new
conversation at the start of every new account opening.
By preparing a rationale for each type of data required, you can
reduce the resistance to more open sharing. Instead of simply
adding new requests from other departments to the list, ask the
subject-matter experts to supply the reasoning behind the request.
By clearly articulating the need to the client—especially when
the situation calls for data and documentation outside of the
norm—you can provide individuals with the information they need
in order to get their firm comfortable with sharing the
information.
Centralize, automate and integrate the workflow
Sell-side participants who manage client onboarding and client
lifecycle management processes on desktop or cloud spreadsheets
report the greatest frustration with inefficiencies and delays, and
they are also the most vulnerable to risks created by human
error.
Building a central, automated system solves these critical
issues and enables the onboarding team to track the number of
requests and where they are in the queue. However, sell-side
organizations that implement centralized systems often struggle
with adoption, and without the participation of departments such as
credit, legal, compliance and risk, the workflow grinds to a halt
or reverts to offline processes.
The solution is to create a system that doesn't require
participants to log into an additional platform and replicate work
they already conduct within their own departmental systems. Using
rule sets, the actions taken and milestones achieved on various
departmental systems can be pushed to the onboarding workflow and
move the process forward without requiring people to learn new
systems or perform additional tasks.
Counterparties should also think carefully before building
self-service portals that enable clients to input their information
directly. While submitting information via a digital portal may
seem to be more convenient than filling out and emailing or faxing
forms, it can actually have the opposite effect, as clients
transacting with several counterparties must now log in to multiple
platforms and adapt to multiple data formats and requirements.
Centralize and analyze the data
Centralizing onboarding activity on one platform can strengthen
and streamline the process, and centralizing onboarding data has a
similar effect. Consolidating the data reduces manual errors by
minimizing data duplication, reducing the amount of rekeying (and
mis-keying) and eliminating the lag time in accessing the most
recent data. It also builds transparency into the system so that
multiple internal teams and, in some cases, external stakeholders,
can gauge the progress of the onboarding process. And finally, when
data is collected into a "single source of truth," it's easier to
keep it clean and up to date.
That same mechanism also enables sell-side firms to measure and
analyze performance across the onboarding process. When the system
is capable of collecting and comparing metrics, businesses can see
which clients generate the greatest volume of transactions, how
frequently requests are rejected or delayed due to a need for more
information and how long each department takes to complete key
tasks.
Focus on high-risk areas
Sell-side onboarding must balance the natural tension between
two objectives: the need to conduct scrupulous regulatory
compliance and the need to expedite the onboarding of new
customers.
Compromising on the quality of the review is not an option, but
separating high- and low-risk events and delegating or automating
the latter can speed up the process considerably. Some banks are
now undertaking analyses of onboarding processes to understand
which types of approvals are automatic and which require a closer
review.
For example, if an account is a mutual fund domiciled in the US
and regulated by the 1940 Act, that account doesn't need to be
reviewed by a credit officer: this step can be undertaken by an
operations analyst. Similarly, AML compliance and corporate tax
departments can establish rules and policies that enable KYC and
tax operations teams to conduct this part of the onboarding
process. In situations where a new account is being added to an
existing agreement, an operations analyst can ensure the correct
capacity and authority is in place and that no special provisions
are being requested, thereby negating the need for costly legal
resources.
By operationalizing pro forma or low-risk activities, sell-side
firms not only minimize risk and accelerate the process, but they
also reduce costs and conserve the energies of their most
specialized, high-value departments and roles.
Formalized offboarding
Establishing a formal offboarding process that closes dormant
accounts and removes entities from agreements once contractual
obligations have been fulfilled is an essential step in building a
more stable and efficient system.
Onboarding in the spotlight
There is a growing recognition that onboarding is a key customer
touchpoint and competitive advantage for the sell side, and that
has thrust this long-neglected area into the spotlight. While every
organization will need to identify the approaches and technologies
that work for their unique environment, the best practices outlined
above—including establishing a single point of contact, making
bolder requests for client data and automating low-risk
events—offer a solid foundation on which to build a faster,
more responsive onboarding process.
Posted 04 May 2020 by Brittany Garland, Executive Director, Platforms & Regulatory Compliance, IHS Markit
IHS Markit provides industry-leading data, software and technology platforms and managed services to tackle some of the most difficult challenges in financial markets. We help our customers better understand complicated markets, reduce risk, operate more efficiently and comply with financial regulation.
