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Why back-office automation is key to a better investor onboarding experience

11 January 2022 Christina McNamara

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.


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