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As the investor onboarding process moves increasingly toward
greater automation and digitization, many back-office functions
continue to be hampered by manual processes that can impact the
overall investor experience and increase compliance risks.
The growing role of automation and digitization in investor
onboarding is nothing new, though has been accelerating in the face
of two overarching trends.
First, regulatory requirements are becoming more onerous,
creating the need for greater efficiency so that fund
administrators and asset managers can automate and complete the
onboarding process in a timely manner while also performing all the
required regulatory due diligence.
Second, client experience (CX) expectations have grown
substantially across the board, including among investors and
high-net-worth individuals. Increasingly, investors expect a
faster, easier and simpler investor experience. As a result, many
invest ment managers and fund administrators consider onboarding to
be a crucial investor touchpoint that can serve as a differentiator
in an increasingly competitive market. Key differentiating factors
include:
● The time it takes to spin up an investor profile from start to
finish
● The speed and ease with which investors can provide the necessary
documentation
● The user experience investors have in monitoring their
investments.
The market has a plethora of automation-driven solutions that
seek to help investment managers and fund administrators adapt to
these trends. However, relatively few address the entire
front-to-back lifecycle of the investor onboarding journey. As a
result, inefficiencies and manual processes continue to cause
delays and add costs to the onboarding process.
Many solutions, for example, simplify the process for investors
to complete a standard questionnaire, provide their identification,
tax, and other necessary documents, and digitally sign forms to
create an investor profile. But the complicated and onerous
back-office steps that follow, such as reviews and due diligence,
also are a critical part of the onboarding journey that impacts the
overall client experience and the ability to comply with
regulations.
Here are some of the potential back-office pitfalls that can
impact the overall client experience.
Investor-specific workflows slow the
process
Once the investor profile is complete, the fund administrator or
manager faces several steps that can vary depending on the investor
and the fund. For instance, if an investor requires a counter
signer or requests third-party legal counsel review, the back-end
process must handle those processes, pushing and pulling investor
data to CRMs and sharing it with third-party investment managers or
asset managers.
Without automated processes to easily customize these
investor-specific onboarding requirements and track their progress,
back-office staff face a time-consuming process.
Evolving regulatory compliance spur
issues
Every year, enhanced regulations emerge across the globe, whether
in the U.S., EU, or APAC. Keeping up with these ever-changing
regulatory obligations is difficult to do internally, but the cost
of falling behind can be severe. A lack of controls and processes
of investor due diligence can lead to compliance issues with local
and international tax authorities.
Yet, independently maintaining and monitoring regulatory logic
can be both time-consuming and costly. If firms are not embedding
regulatory logic in an automated solution, then it is a challenging
manual review process requiring substantial staff effort.
These parts of the onboarding process have a meaningful impact
on the investor experience, as they can slow total onboarding time.
What's more, firms also may face non-compliance issues with local
and international tax authorities if the due diligence process
lacks the proper controls and processes.
Given the breadth of automated solutions available, investment
managers and fund administrators should take a holistic approach in
evaluating their investor onboarding needs, ensuring that the
solution can streamline the entire process.
● Collect static KYC data and free format document upload;
● Perform real-time regulatory checks with KYC and tax logic to
flag inconsistencies or lack of data provided; and
● Digitize all investor data for ongoing monitoring and any
year-end regulatory reporting requirements.
IHS Markit recently
launched Investor Onboarding, the industry's
first fully hosted, digital onboarding solution for managers and
fund administrators. In addition to simplifying and accelerating
the onboarding experience for investors, this new solution
automates and streamlines critical parts of back-office operations
and features unique capabilities to customize administrative
workflows.
Among other features, the solution offers:
● A configurable workflow to align with a firm's back-office
operations, fund documentation requirements, and investor
preferences.
● APIs enabling sharing of investor data with any CRM, due
diligence, and compliance monitoring software, and approved third
parties.
● Collection and storage of investor data in accordance with
security requirements and the Personal Data Protection Act
(PDPA).
● Automated collection and validation of US IRS tax forms,
Automatic Exchange of Information (AEOI) and Common Reporting
Standard (CRS) tax residency forms, and KYC reviews for both entity
and individual investor types.
Learn more about IHS Markit's Investor Onboarding
solution
here.
Posted 11 January 2022 by Christina McNamara, Director, Global Head of Due Diligence, 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.
