Fenergo, a provider of customer lifecycle management software, lambasts the state of financial institutions’ client onboarding in a recently published white paper, but also proposes solutions to the inherent onboarding problems of data management and evolving regulation.
The white paper – entitled ‘Client Onboarding: Solving the Challenges, Maximising the Opportunities’, researched with New York-based banking consultancy Knowledgent and authored by Fenergo CEO Marc Murphy – is based on a survey of 17 Tier 1, 2 and 3 financial institutions spanning sales and trading, wealth management, asset management, retail banking, private banking and prime brokerage.
Its introduction paints a bleak picture of client onboarding, stating: “Perhaps the biggest finding in this report is that, despite its revenue-generating abilities, client onboarding remains an under-funded, technology-lagging and paper-based or spreadsheet-driven process. This is contributing to a well-spring of problems in the areas of compliance, regulation and risk management; client experience; technology and data; and operational efficiencies.”
Bearing this out, the report notes difficulties in client onboarding identified by survey participants and resulting from increasing regulation coupled to poor transparency, visibility and quality of data. Sampling one key problem in each of the four problem areas identified in the report:
- 69% of survey respondents said a lack of a single cross-reference to link clients, accounts and documents creates a compliance and risk management issue;
- 47% said a lack of tools to support onboarding potentially damages the client experience;
- 64% noted the biggest data and technology problem as the industry bugbear of multiple siloed systems and user interfaces used to open and maintain accounts without a consistent cross reference identifier; and
- 31% said paper-driven processing delays cause an inability to adopt best industry practices and affect operational efficiencies.
Reflecting on the survey, Murphy comments: “We are seeing a continuous flow of compliance and regulatory changes. We wanted to validate our thinking on a solution to the data problem on a global scale. We think about a single platform that is first used to support onboarding and is then used to organise the management of client relationships.”
Fenergo’s thinking is endorsed by James Follett, client onboarding practice lead at Knowledgent, which often starts work with clients before recommending them to Fenergo. Follett says: “Looking at the survey results, most of the issues are interlinked, arising from a few underlying core challenges. Automation of the client onboarding function can help to cure many of these pain points by increasing transparency across functions and technologies, enhancing visibility into client profiles – including data and documentation, and improving data quality and inter-institutional data sharing.”
With firms facing the transparency and data quality requirements of regulations including Dodd Frank, European Market Infrastructure Regulation, MiFID II and the Foreign Account Tax Compliance Act, Murphy suggests a solution comprising an enterprise platform combining counterparty data management and client onboarding lifecycle and compliance management to meet regulatory compliance obligations, improve client experience, generate new revenue and cut costs by optimising operational efficiency.
The report makes recommendations on how to automate and improve client onboarding, including: implementing an end-to-end solution; integrating the solution with existing data and technology architectures; achieving a total client view through client and counterparty data management; defining and measuring onboarding against key performance indicators; and future proofing regulatory compliance through self-sufficiency.
Fenergo can respond to these recommendations with its enterprise platform and compliance engine, a sophisticated piece of intellectual property that automatically dictates to a bank what it needs to do and when to remain in compliance on a global basis. To date, Fenergo has 16 banks using the platform, but it acknowledges competition in the market from vendors such as Alacra and Pega, as well as different levels of systems understanding around client onboarding and its related reference data among market participants.
Bringing together market need and vendor capabilities, the report concludes: “By introducing an enterprise onboarding compliance approach to front-office operations, a financial institution has the ability to integrate with other solutions to share client data and documentation that can be consolidated to create stronger, more holistic, accurate client profiles. These can be used to deliver exceptional client service, generate revenue through up-sell and cross-sell opportunities, and accurately measure the client risk exposure facing the institution.”