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Opportunities, Pitfalls During Client Onboarding - New Report

Harriet Davies, Editor - Family Wealth Report, 8 July 2011

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The potential for significant asset growth means new-client onboarding is an important process for wealth managers, but many firms still see this as a back-office function as opposed to a competitive differentiator, a new report from Aite Group shows.

The potential for significant asset growth means new-client onboarding is an important process for wealth managers, but many firms still see this as a back-office function as opposed to a competitive differentiator, a new report from Aite Group shows.

In fact, just 8 per cent of mid-size/large firms view it as a competitive differentiator; for small firms the figure is 26 per cent.

Based on figures from one unidentified bank’s wealth management department, the report shows growth in assets per client is three times more over the first six months of a relationship than over the next two-and-a-half years – reflecting the importance of this period. At this early stage, clients have the momentum to make changes to their financial life and are more likely to transfer in assets held elsewhere.

However, there is a lot of room for improvement in the process, and there needs to be more awareness around the benefits of “going beyond automation and compliance,” Sophie Schmitt, author of the report and a senior analyst at Aite Group, told Family Wealth Report.

Schmitt says onboarding has to become client-oriented, and the delivery needs to be for the client’s benefit. She does believe this is happening, and says the view that it’s “all about client experience” is gradually becoming “part of the DNA of the larger firms.”

“There’s so much to deal with on the regulatory side that understandably that’s always been their top priority,” she says.

The report shows signs of progress: approximately 40 per cent of respondents plan to become more competitive in the area of onboarding. Improved automation and technology feature highly within these plans, as do heightened sales efforts.

At the beginning of a client relationship, the report says, wealth managers must address clients’ holistic needs. “In addition, firms must be able to deliver on these needs in the first 90 days through flawless and coordinated operational processes,” it says.

The research highlights some pitfalls to avoid, including: requiring clients to fill out too much paperwork, asking them to repeat information they have already provided to their financial advisors, and bombarding them with multiple direct marketing pieces from different parts of the organization.

Wealth managers also need to take care to reduce their own risks both on the profit and regulatory side, the report advises. So getting to know as much about your client from the first contact is key, as this enables you both to do your due diligence and also to work out what services you can deliver him or her profitably – using client segmentation as a way of enhancing this.

Schmitt says that at the first point of contact, which is often viewed as a sales meeting, clients will often give lots of useful information about themselves, and this needs to be captured. It can then be used to work out the correct services and pricing and also to devise suitable ways of deepening the relationship.

Information gathering at an early stage also avoids a situation where the firm promises a high level of service delivery early on and then realizes the client doesn’t meet its asset requirement, or that this can’t be done profitably, the report says.

“Firms need to look at this process from the first interaction with the client,” advises Schmitt.

For the report, Aite Group surveyed executives from 99 wealth management home offices or headquarters located across the US early in 2011. Approximately 25 per cent of participants came from large and mid-size wealth firms, the remaining 75 per cent consisted of RIA firms and independent advisor groups affiliated with a larger firm.

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