5 Important Things Capital Market Organizations Need to Consider for Achieving Leadership in Client Onboarding

Implementing an onboarding solution is a critical step for capital market organizations in order to build durable relationships with their clients, enhance their experience with the organization and in the long run, build loyal customer base. When implementing an onboarding solution it is important to consider the solution from a holistic point of view.  An IT or business manager needs to consider the following:

  • Do I have data quality or governance issues?
  • Where is my client data stored?  Is there a single “golden” source?
  • Is my current process manual, semi-automated or fully automated?
  • Does the onboarding process bottleneck? Does it take too long?
  • Do I have visibility into the process?

The new rules and regulations associated with the Dodd Frank Act are going to make things more complex for Capital Market organizations -and they will need the right solutions to make life easier.  Over the last few years of experience in helping capital market organizations effectively leverage IT, the engagements that I have been involved with were mostly related to Dodd-Frank business conduct and the clearing of swaps.  These engagements provided an opportunity to be involved in the decisions that are being made in capital market organizations. While many organizations are currently working to implement an array of tactical solutions, the need for a more strategic response is obvious.  Based on our experience across various engagements, we have been able to identify some of the important things capital market organizations need to consider while planning to implement a client onboarding solution:

1.    Leverage the need to remediate regulatory mandates  to make holistic improvements – enabling you to remain ahead of competition
By leveraging the work born out of the necessity of compliance, there is an opportunity to resolve both immediate and more strategic needs.  Due to the current state of client data and the process to onboard clients in many organizations, it requires the organization to step back and reassess this situation strategically.  The implementation of an onboarding solution is not a minor undertaking.

The onboarding process for a new swaps client has dramatically increased due to Dodd-Frank.   The new requirements as mandated by the Dodd-Frank Business Conduct rules expand and complicate the onboarding process.  The new requirements include:

  • New data points
  • New business rules
  • Document management and validation
  • Affirmation of client data and legal status
  • Document retention and accessibility requirements

It is important to consider all of the outstanding business needs when looking at a solution to resolve these new regulatory requirements.

2.     Improve efficiency and controls by automating business rules and business processes to reduce manual processes and operational effort
During the onboarding of a client, the regulations and business rules must be maintained.  However, when this process is performed manually, the opportunity for error increases.  Using an automated solution including a business rules engine that determines the appropriate path through the system based on the responses collected on such areas as suitability, client eligibility and legal status improves the efficiency and controls governance of that process.

3.    Improve data governance and quality by eliminating data silos – integration of legacy databases, applications and processes
There is an opportunity to improve data governance and quality by implementing a client onboarding solution.  This can be accomplished by transforming the current process of gathering client data and storing that data in each individual line of business system.  The problem is that the resulting data might lack consistency and often these versions of data will increase errors and reduce efficiency.  Instead, a client data repository can be created to maintain client data across all capital markets or the investment bank.  This repository could be synchronized with other client database to ensure consistency across the whole bank.

The term client onboarding is really an umbrella for a number of processes that must occur prior to a client being able to execute a transaction with the bank.  The end goal is that the processes have been completed and the client is ready to trade the approved products.  This means that a holistic onboarding solution must somehow incorporate business processes that might be completed on unrelated systems.  This might include a KYC, AML, CRM, credit risk and a legal document management system.  By including case management technology in the solution, it will allow all of these processes to be tracked in a single place, thus improving visibility and efficiency.

4.    Adaptability for both current and future regulations
An important consideration is the need to implement an automated solution which is adaptable.  The changes that we have witnessed recently, and expect in the future dwarf the previous breadth and pace of regulatory change since any time since the passing of the securities laws in response to the Great Depression.  In addition, a more difficult revenue environment, evolving customer expectations and the competitive need to improve efficiency requires that any solution must be able to adapt to this new normal.  The platform should provide the ability to leverage common frameworks but also customize the experience for each set of users based on role and financial product.  It is now even more important to invest in a solution that can be easily adapted and continue to deliver both regulatory compliance and process automation with tangible returns despite the inevitability of future change.

5.    Need to consider a hybrid technology platform – BPM, ECM and MDM
There is no out-of-the-box holistic solution for the external business conduct Dodd-Frank rules.  The reason for this is that there are too many different touch points and technologies required to create such a solution.  Each organization has different business processes and system infrastructure which would need to be integrated in a holistic solution.

A holistic onboarding solution for capital markets will be required to provide a wide array of functionalities in order to resolve pain points, meet other existing business requirements and address the new mandates brought on by Dodd-Frank.  In order to resolve all of the business requirements a holistic onboarding solution will involve consideration of multiple technology disciplines including – BPM for feature such as workflows and case management, ECM for document management and records retention and MDM for data governance.