Next Level Client Onboarding in Wealth Management – Insights from Deloitte’s benchmarking service
Strategic relevance of client onboarding
We believe that a fast and convenient client onboarding process can be a competitive advantage for financial institutions.
Prospective clients obtain their first impression of providers from onboarding, and this can be a major differentiator when comparing and choosing between them. Clearly defined and consistently implemented onboarding standards are also key for managing the bank’s risk appetite and for complying with regulatory expectations.
We have developed a client onboarding benchmark service specifically for Wealth Management firms. The benchmark dataset already includes more than 20 leading institutions that account for approximately 80% of assets under management (AuM) in Switzerland and Liechtenstein, and it will be extended to other countries in the next edition. The benchmarking covers three key areas:
- Client experience, roles and responsibilities
- Speed and efficiency of onboarding
- Digitalisation and automation levels
Key insights from the latest edition
Swiss wealth managers face significant challenges with optimising and digitalizing client onboarding processes;
- None of the banks self-assessed their process to be ‘very convenient’ for clients.
- 50% of the institutions are still operating an entirely paper-based client onboarding process.
- Although many have invested in digital tools and are continually working to improve automation levels, these efforts have not necessarily resulted in reduced onboarding lead times and revisit ratios.
- On average, 50% of onboarding requests need to be revisited and sent back for correction, because the KYC profile or documentation has not fully met the onboarding requirements (see Figure 1).
Figure 1: Key insights
1. Client experience, roles and responsibilities
A few leading wealth management firms have invested in improving client onboarding to create a convenient and simple process that can be fully digital. However, other institutions are at a competitive disadvantage. First, most of the participating banks in our survey consider their onboarding process to be ‘not convenient’ for clients. Second, over 50% described their client onboarding processes as ‘complicated’ or ‘very complicated’. Third, half still operate a ‘fully paper-based’ interface with clients, as they lack the capability to digitally identify clients and digitally collect the relevant information required (see Figure 2).
Figure 2: Client onboarding experience
From a front-to-back process perspective, there are four key functions involved in client onboarding: Client Relationship Management, Business Risk/Compliance (Front Support), Operations and Compliance & Risk. On average across the wealth management industry, the Client Relationship Management function spends 23%, Business Risk/Compliance (Front Support) 19%, Operations also 19%, and Compliance & Risk 33% of their total FTE capacity on client onboarding-related activities. This serves as evidence that client onboarding is a front-to-back process which binds a lot of capacity and so presents a significant opportunity to increase efficiency.
From a risk governance standpoint, in most cases the control functions (second line of defence) are closely involved in the onboarding process in an operational capacity. Most banks named allocating responsibilities clearly between the first and second lines of defence as one of their greatest challenges. If the Compliance function is involved in both operational and controlling/monitoring activities, its independence becomes limited.
We had controversial discussions on the role of Compliance in taking client risk decisions. Clearly, Compliance has an important role in defining KYC standards for client approval and in the due diligence of higher risk clients. However, Compliance as a control function should not be the ultimate decision-maker as this limits the ownership of the business functions.
2. Speed and efficiency
Some of the most relevant KPIs are lead times and revisit ratios.
Our definition of lead time includes the time it takes to collect the information from the client. Some banks say that they are able to onboard clients in less than 2 days, but several others reported lead times of over 30 days or even over 50 days to onboard a wealth management client. The industry average however lies around 14 working days. Interestingly, for international and small private banks, onboarding a legal entity takes the longest, while for G-SIB divisions and other banks active in wealth management, opening an account for an offshore individual seems to be the most time-consuming. We also found that even though some banks have invested in integrated workflow solutions and digitalising internal interfaces, the expected lead time reduction has not yet materialised for many.
Overall, the average percentage of submissions requiring a revisit by relationship managers, because the client profile or submitted documentation has not yet fully met onboarding requirements, is 49%. This implies significant process inefficiencies. For Swiss G-SIBs the revisit ratio varies between 20% and 60%; and international private banks have even lower process stability, with revisiting ratios varying between 10% to 100%.
Figure 3: Lead times in wealth management
(Swiss average relates to clients booked in Switzerland)
3. Digitalisation and automation levels
Across all stages in the onboarding process, automation level is considered ‘low’ by most banks and ‘medium’ by Swiss G-SIBs. Most wealth managers see potential in automating the onboarding process further, particularly in the areas of client identification and enhanced due diligence. Most wealth managers say that they are planning substantial investments in technology over the next three years. Digital solutions for (integrated) name screening and workflow tools are already in widespread use across the market. On the other hand, digital signatures are used by just one in three banks (33%), and client network visualisation tools at just one in four (25%), although a half stated that these will be priority areas in the next few years.
Video identification is another area with low uptake, with only one in five banks (20%) currently offering this functionality. Biometric identification was not in use by any institution in the survey and surprisingly 80% do not even intend to introduce it.
The COVID-19 pandemic has led to an acceleration in the adoption of technological solutions in wealth management, for example greater interest in video identification due to restrictions on cross-border travel. Nevertheless, the technological capabilities of players in Europe still lag behind those in Asian markets such as Singapore.
Figure 4: Most common digitalisation tools in onboarding processes
In our experience, successful transformations of onboarding processes are characterised by the following key success factors:
- Radical re-design of process: Instead of improving the process incrementally, define the ambition and re-design the process radically, taking a front-to-back perspective.
- Fact-based business case to convince relevant stakeholders: Perform a detailed diagnostic analysis of your current process, and leverage benchmarks and best practices to identify opportunities for improvement.
- Business/functional driven solution: Define clear business and functional requirements and determine the specific technological capabilities you need before you evaluate vendors and tools.
If you would like to discuss this topic, or carry out a diagnostic analysis of your client onboarding process, do not hesitate to contact us.
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