When it comes to onboarding, most firms are missing the boat

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Wealth management firms are risking losing clients to competitors, losing a chance to gain new business through client referrals and are missing opportunities to deepen relationships with existing high-net-worth investors, according to a new study by Aite Group, an independent Boston-based research and advisory firm focused on the financial services industry.

The study, based on a survey of 99 U.S.-based wealth management home offices and conducted earlier this year, looks at the companies’ attitudes toward client onboarding, the process by which firms acquire and acclimate new customers.

Researchers found that 70% of the companies viewed client onboarding as primarily either a back-office function that needed cost-containment attention or a front-office automation issue. Only a minority of 30% saw it as a competitive opportunity.

Sophie Schmitt, a senior analyst at Aite, and one of the study’s authors, says, “Most of the companies — especially the midsized ones we surveyed — have a too narrow view of onboarding. For them, it’s a matter of trying to get the cycle time for new clients from agreement to funding over as quickly as possible. What we’re saying is that they need to have a broader focus.”

Schmitt says, “Onboarding is not just about operational efficiency. It’s about getting to know your clients well so you can understand all their needs. Then you can get all their accounts and not just the first one. And they are much more likely to go out and tell their friends about you.”

Sure, technology is important, Schmitt agrees, “but that’s just the starting point.” She said very few firms — large, midsized or small — actually track and monitor their wealth management customer service level. “They are not really managing the process,” she explains.

Part of the problem, she said, is that the kind of monitoring she’s talking about requires an added layer of software that has visibility of all the systems. 

“What we hear at every conference we go to, whenever we sit down with people, is the issue of regulatory risk and dealing with the new Dodd-Frank Act requirements," she says. "That’s understandable, but the firms that do take onboarding seriously are clearly going to come out ahead competitively.”

"If clients get a flawless experience at every touch point, the effort to improve the onboarding process should more than pay for itself in more business form clients, and more client referrals," she adds.

Dave Lindoff writes for Financial Planning, a SourceMedia publication.

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