Onboarding is a crucial step for any wealth management office. Not only does it allow you to gain the required information to manage a person’s investment, but it’s also the first impression you give to a new client. Traditionally, this process has been done via paper forms, which were then re-transcribed into a database.
However, this era has passed, and customers now vastly prefer a digital onboarding process. In fact, nearly 70% of wealth management customers now expect their onboarding to be fully digital. A combination of convenience and additional security provided by digital forms is what explains the switch.
Creating a few digital forms is only a small portion of this equation. Creating a digital software stack to support the overall customer experience is the most complicated and potentially costly part.
This article will go over the evolution of onboarding in wealth management, show the key components to make this process digital and help you create a plan to get yourself started.
Wealth management onboarding has historically been done via face-to-face meetings, paper forms and physical ID verification. While this way of doing things was slower, it was often seen as a core portion of the wealth management experience, allowing advisors to build a relationship with their clients.
Over the years, and especially with the evolution of the Internet, wealth management onboarding has been digitized, starting with forms and email communication. This change has made the industry overall grow to new heights, and allowed smaller players to compete with the giants.
Digitized forms could only do so much, but they started to gain their true power in recent years with the arrival of CRMs and workflow automation software like Mako. With the added functionality, a growing level of complexity has been added. A fully digitized onboarding experience also brought an added level of complexity that a lot of wealth management offices aren’t equipped to take on.
Building a comprehensive wealth management onboarding experience is a careful orchestra of forms, software and their integrations. A tech stack is the resulting group of software solutions that handle the onboarding experience.
It can be difficult to determine what your organization needs without prior IT knowledge, and the solutions available vary greatly. Here are a few examples of what is typically found within a wealth management tech stack:
The most common players in this space are Salesforce and Microsoft Dynamics. This type of software allows you to manage a customer’s lifecycle at all stages. A CRM is where most key customer information ends up, including communications and notes.
While Mako doesn’t replace a CRM, it integrates with a few popular options and can be a great companion to increase the ROI of such a tool.
These tools help you automatically run compliance checks like government anti-money laundering checks. Another tool in the security realm is e-signature tools such as DocuSign, which allow your customers to complete onboarding fully online with no signature scanning required.
Mako offers a variety of compliance check tools via an integration with Trulioo for identity and AML verifications. Additionally, Mako includes a native e-signature module that can be integrated directly into the form without the client ever having to leave the onboarding experience.
The data being collected during a wealth management onboarding is extremely sensitive. Not only does it need to be kept safe, but it must also be auditable and easy to reference. Excel is the usual starting point, but digital vault platforms like FutureVault can be a good upgrade down the line.
While Mako isn’t intended as a data storage solution, some clients have transitioned away from their Excel databases due to Mako’s clean UI, detailed permission control and faster data lookup capabilities.
While email communications to clients are essential to maintain status on the form filling, it’s also essential to have a good notification system for the required signatories within the wealth management office as well.
This process will most often be done through your email client and your CRM’s capabilities via an integration of the two. Mako allows you to skip that step with a robust email notification system that can be customized to your needs.
Digitizing your onboarding experience can be a daunting experience without a dedicated IT professional within your team, but it can go smoothly if you have a good plan in place. Here are the 3 main steps you’ll have to take:
The most important discussion you can have in regard to your onboarding experience is with the people actually providing it. Your staff will tell you their true pain points and what your clients feel should be improved.
This can be done informally in a meeting, but ideally, you should lead this process through a dedicated survey platform to have proper data to analyze before making a decision.
After speaking with your workforce, the next step is determining what will need to be digitized. You might realize that certain aspects of your onboarding experience are fine as they are, and you simply need to fix a few inefficiencies through technology.
Make a detailed plan of how you envision your onboarding experience, and list the software you think will be required. This is also the ideal moment to look into software like Mako that can take on multiple aspects of your onboarding experience, reducing the need for a bloated tech stack.
Getting a good idea of what a product can do and determining if it’s right for your needs can be hard to gauge, even during a demo. Prepare yourself with a list of questions you ask all your potential suppliers so you can later compare the answers. Here are a few ideas:
The final list will need to be personalized to your needs, but the above questions must be answered in any case for digital wealth management onboarding.
Wealth management digital onboarding is bound to continue to evolve and become a much more powerful tool than it currently is. One thing is certain: it will remain an essential part of the operations of a wealth management office.
Innovations in the field of AI and data analysis will eventually allow for robust personalization that will bring wealth management to new heights. This highlights the importance of building an efficient tech stack now in order to be ready for future advancements.
If you’d like a detailed demo of our comprehensive digital onboarding software, contact us here.
So in my view an appropriately diversified portfolio should have enough exposure to different asset classes, that its able to withstand a wide range of market disruptions. Usually, it’s some kind of negative or positive event… they’ll affect different asset classes differently. So by having your eggs in different baskets you’ll be well insulated from major risk. For example, there’s some kind of change in the housing market… both by having some exposure to it, you won’t miss out on the opportunity to make money. But if it’s something negative, you’re also not going to lose all your money if all of it were in the housing market for example. So at a high level, a properly diversified portfolio should grow in a growing market and yet not be at risk of major losses in a declining market.
You asked also about an efficiently diversified portfolio, and I would say that that’s a portfolio that achieves those goals with a minimum of different positions. There’s a lot of good reasons to have fewer positions in your portfolio. Being less complex means a portfolio is easier to rebalance and administer. Every time part of your portfolio goes up or down, you're going to need to rebalance it a little to make sure that it stays with the right allocations and the fewer positions you have, the easier it is to do that..the less trading fees you incur doing that.
There is a tradeoff between being completely diversified and being efficiently diversified. If you were completely diversified then you’d have a proportional segment of absolutely everything you could invest in under the sun, like shares of palm oil futures or something like that. I don’t think everyone should have palm oil futures in their portfolio but I’m not a wealth manager. I think it comes down to your portfolio and how large it is (probably the Canada Pension Plan has a proportion of palm oil futures in it). You’re going to have to talk to your advisor and choose a degree of complexity that’s right for your portfolio.
CN: Let’s just take a step back - what does a typical portfolio look like and has that changed over time?
RB: Yeah, so I'm not entirely sure what a typical portfolio looks like these days because it's actually changed quite a lot over time. I think common wisdom used to be that the classic balanced portfolio was 60% public stocks and 40% bonds. These days that's ancient history. Most would say that the bond allocation should be a lot lower these days in this age of unprecedented low-interest rates. These days it’s the stock portfolio that’s been driving a lot of the growth. I think a well-diversified portfolio in the modern era should absolutely include exposure to all kinds of alternative assets (that aren't even really that alternative but still kind of fall out of that traditional bucket). So you know I mentioned real estate, private companies, maybe for example commodities or other types of investments. So I think that there are a lot of things that you can invest in and your advisor can guide you on what’s appropriate for you.
CN: Yeah that makes a lot of sense. Talking about alternative investments, we’ve heard a lot this year about ESGs, impact investing, alternative investments… do you think there’s more of an appetite today for these types of investments than in the last ten years?
RB: Yeah that’s a topic that’s close to my heart having previously started an impact investment company. It’s definitely been a gigantic increase in interest. I think when I started my previous company we were speaking to large wealth managers and having them say “we’re barely getting a grip on early ideas.” Like not including gun manufacturers or tobacco companies, and now these same companies are launching impact portfolios and marketing this aggressively. So there’s definitely been a seat change, it’s a real industry, and there’s a lot of studies out there and data showing that ESG or impact investing can equal or outperform non-impact investments. So I think it’s a huge part of the market these days. That said, one of the things that’s driving it is people’s interest in it. I think that one of the stories of the investment industry has been the personalization of it. People’s portfolios are being tailored to their own needs and circumstances. Impact investing is definitely a piece of that. People are environmentalists, but an institution is not an environmentalist. It doesn’t live and breathe the impact on the environment the way an individual does. The person who is active in the David Suzuki Foundation for example is going to be active as an impact investor and it’s appropriate for them to be.
That’s a great question. I think there's a lot of advantages and you gain a lot with an automated platform. For me, it's a lot easier to manage. I have some of my money in one of these platforms and I barely think about it. It's being rebalanced all the time. The costs are much lower in terms of expense ratio for the same kind of rebalancing. Again you're missing a lot with that, but on just the mechanical portfolio rebalancing you're getting a great deal there. I would say that two other advantages are up-to-the-minute reporting, so you always have that login where you can see your position, see how your portfolio is doing historically. And finally, this is an advantage for me and anyone who doesn't love doing taxes, but typically they’ll take care of your tax forms for you, and end up with much simpler tax forms, so it kind of works out what your cost basis was and how much you have to report.
CN: So let's talk about the other side of the coin then...what are the risks of not having a seasoned professional managing your money?
RB: I wouldn’t exactly phrase the question that way. You know it's more what’s the benefits of having a real wealth manager? Some of the clients of robo advisory firms may not even be aware that they're missing out. A wealth manager isn't just balancing your stocks and bonds, that's kind of the very lowest mechanical level of what you get out of the wealth manager. Really they're your advisor on your life. Intimately intertwined with you because you're thinking about retirement planning, on planning for college for your kids, when is the right time to buy a house, and when should you get life insurance, for example. An advisor can help you with all of those decisions and they can connect you with service providers like a mortgage broker when you may be in need of one. So I think that you get a lot of value out of having one of these advisers, particularly when you get to a stage in life when these kinds of services are more about the long-term and your life circumstances are far more critical.
CN: There are clearly pros and cons and two sides of the story depending on who you're asking. Like you said, what stage of their life they’re in ...but do you think the platforms that we’re seeing emerging like to Qtrade, Wealthsimple, and all the rest will ever become status quo?
RB: Yeah, I do actually. I think that similarly to how you know we’re using online platforms to automate everything for us (I can’t think of the last time I used to travel for example), everything you’re going to be trying to do with your money is going to be automated, and it’s going to be appropriate to be handled by one of these one of these platforms. In particular, for most people at an early stage in their lives that have few assets to manage, not a lot of complexity, not a very extended personal family circumstance, it’s gonna make a lot of sense to have a low fee robo worry about it. But at some point their life circumstances are going to get more complex and you’re gonna get married, or maybe you’re not, or you may have other objectives that you may want some advice on and at that point it may make sense to either supplement the robo advisory portion of your portfolio, or graduate to a more holistic wealth management view.
CN: Thank you so much Raph, these answers were great. It’s always insightful chatting with you so thanks for sharing those answers with us today.
RB: It’s my pleasure.