What is client onboarding in wealth management?

Client onboarding is an umbrella term for several processes that must be undertaken when a new client is interested in working with a financial advisory firm.

Client onboarding processes include:

• Prospecting
• Product selection
• Regulatory checks
• New account opening (NAO)

Wealth management onboarding encompasses the first serious interactions between an advisor and investor, and lays the groundwork for the long-term client relationship.

Traditionally, client onboarding has involved a lot of time-consuming manual paperwork, but many broker-dealers and other wealth management firms are digitizing and automating the process in order to improve the client experience and save money.

What is the wealth management account opening process?

New account opening is the process of opening client accounts with custodians and clearing firms in order to buy and sell securities. It is the most complex and involved component of client onboarding.

The traditional wealth management account opening process involves:

• Filling out paperwork for each account
• Collecting client signatures
• Overnight mailing or faxing the paperwork to the back office
• Conducting various regulatory and compliance checks
• Mailing or faxing the application to the custodian/clearing firm for approval

Because the traditional process is paper-based and manual, many applications submitted to custodian/clearing firms are rejected for errors and marked NIGO (not in good order).

According to one survey​ from Fidelity, 23% of new account applications experienced NIGOs. These rejected applications damage the client experience because they must be returned and the errors fixed before the account can be opened.

Due to the high cost and manual nature of this process, many wealth management firms have digitized their new account opening workflows using software.

Is client onboarding the same as new account opening?

These terms are often used together, and the distinction between them can be confusing. Let’s clarify.

Client onboarding​ is the more comprehensive term, encompassing processes that fall outside of new account opening, such as prospecting and client questionnaires. ​New account opening is the more specific term, and applies only to the process of opening client accounts.

However, since NAO is the most complex, time-consuming and expensive part of client onboarding, it receives the lion’s share of attention during digital transformation initiatives. Software tools focused on client onboarding will often specialize in NAO.

How do firms automate client onboarding?

Financial planning and advice firms can automate client onboarding by using software that takes advantage of digital solutions like esignatures, straight-through-processing, automated compliance checks and integrations with third-party tools.

Automation reduces the amount of labor hours spent onboarding clients, speeds up the process and minimizes errors.

Here are some of the ways technology can be used to automate client onboarding:

• Automatically import client data from the CRM into forms to reduce re-keying
• Automatically bundle the proper forms for account applications
• Reduce redundant data entry within forms
• Automatically verify that applications are in good order to reduce NIGOs
• Integrate with Know Your Customer and Anti-Money Laundering solutions to speed up compliance checks
• Integrate with investment proposal software
• Electronically transmit paperwork to the back office and custodian
• Simplify the client experience through the use of esignatures

How does digital account opening work?

Digital account opening, as opposed to paper-based account opening, is a cloud-based process that eliminates the manual work from NAO by leveraging esignatures and straight-through processing to improve turnaround times, reduce errors and enhance the client experience.

Rather than mailing and faxing forms between the client, advisor, back office and custodian/clearing firm (a time consuming process that often precipitates errors), digital account opening allows this process to happen electronically.

One emerging type of digital account opening is “formless” new account opening, in which no paperwork is used at all and the system relies on collecting data through wizard-like experiences and transmitting it through deep integrations with the back office and custodian/clearing firm.

Some experts believe the future of new account opening rests with this formless strategy, which reduces work for advisors while also reducing errors and improving the overall client experience.

What are the options for new client onboarding software?

Broker-dealers and RIAs searching for new client onboarding software will find plenty of options. Generally, digital onboarding financial services software solutions fall into four categories:

1. Build-it-yourself

Some large wealth management firms with access to development resources have chosen to build client onboarding software in-house.

2. Point solutions

Some firms have digital client onboarding processes that consist of several different software solutions from different vendors, such as esignature, document storage and digital onboarding workflow engines.

3. Integrated solutions

The gold standard in client onboarding. Integrated solutions (like the Docupace Platform) are industry-specific, comprehensive platforms that include everything a firm needs to digitize its onboarding workflows, plus built-in integrations with custodians and technology vendors.

Digital account opening tools that integrate with many different custodians and clearing firms are called “universal account opening” solutions.

4. Custodian-specific solutions

Some custodians offer their own digital account opening solutions for only their own accounts.

What should you consider when choosing a financial services client onboarding solution?

Every firm has its own needs and goals, so there is no one-size-fits-all approach to building a client onboarding tech stack.

Here are some questions to ask about potential solutions to help you determine which is right for your firm:

• Do they have partnerships/integrations that will enable straight-through processing for all your investment products, including annuities and mutual funds?
• Do they integrate with your CRM, KYC tools, suitability tools, proposal software and other components of your tech stack?
• Do they have the flexibility to customize their product to your firm’s specific needs?
• Do they offer training and support?
• How many financial advisory firms use their software? What is their standing in the market?
• Do they offer FINRA- and SEC-compliant document storage?