What Is Client Onboarding in Wealth Management and Why Is It Important?
Understanding the Wealth Management Regulatory Compliance Landscape
When wealth management firms provide secure, convenient customer onboarding experiences, they can reduce abandonment while achieving regulatory compliance.
Automated digital onboarding can help wealth management firms quickly gather and verify the necessary client information for Know Your Customer (KYC) requirements. The process reduces time and effort for the firm and customer.
Wealth Management KYC and Identity Verification
Client Onboarding in Wealth Management
Most countries and regions require wealth management firms comply with Anti-Money Laundering (AML) laws by knowing their clients and the risk they pose.
The EU has multiple AML directives. In Canada, wealth management firms fall under security dealer laws and must report to the Financial Transactions and Reports Analysis Centre of Canada. In both cases, KYC is a requirement for asset and wealth management companies.
AML laws in the U.S. don’t cover registered investment advisors (RIAs). But those advisors often work through reporting entities, such as broker-dealer platforms, to execute trades and hold securities.
RIAs often adhere to AML programs that include KYC to maintain their business relationships with banks, brokers and reporting entities. Those entities perform Know Your Customer’s Customer to ensure questionable funds don’t come from their clients.
Advantages of Digital Onboarding for Wealth Management
Wealth management client onboarding is not purely for compliance. It’s an introductory experience that establishes a working relationship. Clients often expect secure and convenient onboarding for wealth and asset management services.
Digital onboarding in wealth management can save time and cost. The client doesn’t have to visit an office, data validation quickly uncovers missing information and errors, and firms can avoid time-consuming manual work.
Robust digital onboarding can provide intelligent data capture that helps ensure accuracy and limit instances of customers needing to resubmit information. Those systems also enable streamlined audits and give firms greater insight into customer activities for wealth management services.
Types of Wealth Management Digital Onboarding
When wealth management clients open new accounts, the first step is identity verification. Digital onboarding can provide automated steps that accelerate the process while meeting KYC requirements.
One identity verification technique uses computer algorithms to match information such as name, address, birthdate and national ID number with reliable data sources. Another approach analyzes digitized images of identity documents for tampering or forgery and then compares the ID photo to a live selfie.
Both techniques use advanced data analytics using technology such as machine learning and artificial intelligence. With large data sets, sophisticated algorithms and deep subject matter expertise, leading identity verification services can provide assurance and identity proofing.
Automated onboarding systems also can accelerate and simplify AML watchlist screening, which checks verified identity information against global watchlists of sanctioned users and businesses, politically exposed persons and suspected criminals.
That process helps firms enhance fraud prevention and risk mitigation. The goal is to stop criminals before they open accounts and create damage.
But firms don’t have to apply the same onboarding steps to every client and in every circumstance. A risk-based approach to onboarding enables firms to adjust verification steps to meet a client’s potential risk. For example, firms can add an ID document verification layer on top of a digital identity verification process in higher-risk situations.
Maintaining a Competitive Edge
Many wealth management firms must achieve regulatory compliance. But there are ways to avoid complex, time-consuming digital onboarding that doesn’t meet customer expectations for speed and convenience.
An agile, intelligent global identity platform can help firms adjust quickly to new markets and constantly evolving regulations. Firms that quickly onboard legitimate customers and mitigate risk while achieving regulatory compliance can find a competitive edge in a global wealth management market.
