Redesigning the fund onboarding experience

By Keith Delahunty Senior Product Manager
April 22nd 2022

Redesigning the fund onboarding experience: The case for digital automation

The benefits of intelligent digital onboarding are manifold: improved customer experience and engagement, internal operating efficiencies, enhanced risk control, happier employees and strengthened regulatory compliance. Clients, investment managers, fund administrators and regulators all agree digital automation is the way to go.

Yet the funds industry has been slow to embrace the emerging digital technologies and ways of working. That’s no longer sustainable – especially as regulators tighten their anti-money laundering (AML) and know your customer (KYC) rules.

Onboarding pains

Many of today’s client-facing investment management workflows – from initial onboarding (including AML/KYC checks) and capturing investment preferences to monitoring performance and processing subscriptions and redemptions – remain paper-based and highly manual.

Account set-up processes are slow and error-prone. Corporate clients can take up to two months to onboard. For individual clients, it can be anything from one to six weeks.

And the process is frustrating. Investor onboarding teams must perform hundreds of manual tasks every day to verify the identity and assess the risk and suitability of every new customer. Typically that involves numerous back-and-forth interactions between the investment manager and client, with lots of paper deliverables (which are often still mailed or faxed). Employees may need to re-key the same data into multiple systems and spreadsheets, manually access third-party systems and liaise with different teams across the globe. The data then sits in different departments with no single source of the truth.

Even where firms have taken steps toward a digitalised, automated environment, too often the tools fall short or are underused.

While investor portals have become commonplace within the funds industry, many serve only as information hubs, their function simply to generate and distribute periodic investor reports and other documents. Where digital investor onboarding capabilities do exist, the service tends to be limited to subscribing existing investors to additional funds. New client prospects with no previous relationship with the investment firm won’t be able to access that digital platform until their identity and source of funds have been validated.

These limited tools only provide one piece of the digital jigsaw. What firms need instead is an integrated digital solution that allows the full sweep of transfer agent activity – from onboarding through the investment lifecycle to offboarding – to flow without human touch.

The digital future

Automated straight-through processing will enable faster, simpler, more robust and compliant investor onboarding. The goal is to allow clients to upload their data securely, when they want, via their device of choice. They should have access to customised and digitised fund subscription documents, KIID documents and fund reports. Investment managers in turn should be able to control which materials and subscription forms prospects and investors can access, and how they interact with those documents. And the whole digitalised environment needs to be protected by advanced cybersecurity measures to combat the ever-changing threats.

A range of fast-developing, artificial intelligence-related technologies are coming together to make this vision of a seamless, automated onboarding flow reality.

Digital certificates are a prospective game-changer, offering the potential for a global, controlled and regulated ID verification standard. Digital certificates (if administered by a centralised, utility-type body) would enable clients to validate who they are and serve as a single record of AML/KYC information, removing the need for duplicated identification requests from multiple fund providers.

Smart digital forms provide investors with a step-by-step walkthrough of the subscription process, allowing users to input data in a structured format while ensuring each relevant section is completed accurately, with validated information feeding straight into the transfer agency system. The result is an efficient, user-friendly electronic experience.

A combination of technologies is also helping automate data entry activities. Optical character recognition (OCR) uses photoelectric devices and computer software to identify printed characters in paper records and convert them to digitised texts. Intelligent character recognition (ICR) similarly interprets handwritten or printed characters so they can be transcribed into a standardised format that a computer can recognise and understand. Natural language processing (NLP) enables computers to understand text and spoken words in much the same way as humans.

Digital signatures are increasingly accepted in jurisdictions around the world, their adoption a key step towards replacing paper documents. Electronic signatures – a digital code generated and authenticated by public key encryption, and attached to an electronically transmitted document – can then verify the document’s contents and the sender’s identity.

Robotic process automation (RPA) is being used to supplant repetitive, rule-based, monotonous tasks. As those capabilities advance, RPA will be introduced into ever more processes. Machine learning (ML) also offers significant potential. Its capacity to learn from past transactions and customer decisions, identify decision-making patterns and use those to make future choices will streamline the onboarding effort and provide investors with easier, more tailored experiences.

Combining these technologies with a flexible workflow software solution that can set up, perform and monitor a defined sequence of processes and tasks will further aid end-to-end transfer agency automation and boost productivity.

The success imperative

Digitalising the client onboarding process, including firms’ AML and KYC checks, has become a matter of competitive necessity. Investors increasingly expect a user-friendly, efficient and streamlined onboarding experience. Plus digitalisation helps firms cut costs and reduce risk. Little wonder the Financial Action Task Force (FATF) now recommends digital onboarding be used whenever possible.

Implementing solutions that address individual parts of the process – as many wealth managers, asset managers and asset servicers have done to date – is no longer enough. Delivering an intelligent automation programme is challenging. But future success will depend on offering a smooth, fully digital investor experience.

ABOUT DEEP POOL

At Deep Pool, we go a step further.

For one, we provide the industry-leading investor servicing software that fund administrators need to automate their end-to-end processes. The resulting efficiencies, scalability and client servicing benefits have proven transformative for users’ businesses.

But we also back the technology up with deep consulting expertise.

The Deep Pool team brings together qualified accountants, business analysts and software engineers to create a unique blend of industry know-how and experience. Having been on the client-side, we understand what it’s like. That makes us ideally positioned to deliver the best fixes for administrators’ problems and frustrations.

And where they need it, clients can lean into us for support. By leveraging our consulting services, clients can plug those knowledge gaps that departing staff may leave behind. This is a partnership after all. And we are dedicated to helping our clients maximise their success.

Keith Delahunty
Keith is responsible for all aspects related to Transfer Agency, driving product development, vision, strategy, & execution across Deep Pool applications. Keith holds a master’s degree in finance & has extensive experience working in Private Equity, Alternative & Retail asset classes.