Sell-Side Onboarding: How to Turn It into a Competitive Advantage

In the past, onboarding has been overlooked and undervalued, but sell-side organizations are recognizing that the process is critical to their ability to compete for and retain clients. 

For both the buy sides and sell sides, onboarding has remained a manual, ad hoc process. While other operational areas have benefited from next-generation technologies, onboarding teams on both sides have continued to rely for the most part on email and spreadsheets.

But as global finance has become more complex and uncertain, the cracks in an overburdened process have widened. Trends such as the continued rollout of derivatives, global tax reforms, more rigorous KYC requirements and greater risk and compliance activities have stretched onboarding teams to breaking point.

For the sell side, the incentives for getting the process right have never been greater, as onboarding speed and responsiveness has become a factor that directly influences the buy side's decision to work with a specific counterparty. But what is the best way to remediate and accelerate sell side onboarding? 

Through bilateral conversations across both the buy side and sell side, SIFMA Asset Management Group and IHS Markit explored the challenges banks and brokers face and identified best practices that are helping them enhance onboarding speed and efficiency without compromising diligence.

Create a single point of contact 

Perhaps the single most important change that sell-side participants can make to their process, establishing a single point of contact for the client significantly accelerates onboarding speed and enhances the client experience. 

Counterparties that task multiple teams such as KYC, tax, legal and regulatory with contacting clients, either directly or through a sales team, create time-consuming and uncoordinated systems, placing undue strain on both the client and the organization.  When clients are contacted by multiple people making different (and sometimes overlapping) requests, it creates confusion, delays and distrust. Additionally, when the responsibility for data collection is distributed across multiple people or teams—or, in some cases, even offshored—no one feels directly responsible for maintaining the quality of the client relationship. 

Providing a central onboarding team—ideally, one in the same area and time zone—creates consistency, continuity and a closer rapport with the client. This not only improves the client experience, it also makes clients more likely to provide information.

Recognize the value of data sharing 

One of the most effective changes sell-side onboarding teams can make is to be bolder about asking for client data. This may be a controversial approach, as clients can be very protective of their company’s data, but the longer it takes to collect the data, the longer the onboarding process will take. Ideally, the conversation about data sharing should examine the overall need at the operational level, with the goal of broadening those categories universally. This is more effective than initiating a new conversation at the start of every new account opening.   

By preparing a rationale for each type of data required, you can reduce the resistance to more open sharing. Instead of simply adding new requests from other departments to the list, ask the subject-matter experts to supply the reasoning behind the request. By clearly articulating the need to the client—especially when the situation calls for data and documentation outside of the norm—you can provide individuals with the information they need in order to get their firm comfortable with sharing the information.

Centralize, automate and integrate the workflow 

Sell-side participants who manage client onboarding and client lifecycle management processes on desktop or cloud spreadsheets report the greatest frustration with inefficiencies and delays, and they are also the most vulnerable to risks created by human error. 

Building a central, automated system solves these critical issues and enables the onboarding team to track the number of requests and where they are in the queue. However, sell-side organizations that implement centralized systems often struggle with adoption, and without the participation of departments such as credit, legal, compliance and risk, the workflow grinds to a halt or reverts to offline processes. 

The solution is to create a system that doesn't require participants to log into an additional platform and replicate work they already conduct within their own departmental systems. Using rule sets, the actions taken and milestones achieved on various departmental systems can be pushed to the onboarding workflow and move the process forward without requiring people to learn new systems or perform additional tasks. 

Counterparties should also think carefully before building self-service portals that enable clients to input their information directly. While submitting information via a digital portal may seem to be more convenient than filling out and emailing or faxing forms, it can actually have the opposite effect, as clients transacting with several counterparties must now log in to multiple platforms and adapt to multiple data formats and requirements.

Centralize and analyze the data

Centralizing onboarding activity on one platform can strengthen and streamline the process, and centralizing onboarding data has a similar effect. Consolidating the data reduces manual errors by minimizing data duplication, reducing the amount of rekeying (and mis-keying) and eliminating the lag time in accessing the most recent data. It also builds transparency into the system so that multiple internal teams and, in some cases, external stakeholders, can gauge the progress of the onboarding process. And finally, when data is collected into a "single source of truth," it's easier to keep it clean and up to date. 

That same mechanism also enables sell-side firms to measure and analyze performance across the onboarding process. When the system is capable of collecting and comparing metrics, businesses can see which clients generate the greatest volume of transactions, how frequently requests are rejected or delayed due to a need for more information and how long each department takes to complete key tasks. 

Focus on high-risk areas

Sell-side onboarding must balance the natural tension between two objectives: the need to conduct scrupulous regulatory compliance and the need to expedite the onboarding of new customers.

Compromising on the quality of the review is not an option, but separating high- and low-risk events and delegating or automating the latter can speed up the process considerably. Some banks are now undertaking analyses of onboarding processes to understand which types of approvals are automatic and which require a closer review. 

For example, if an account is a mutual fund domiciled in the US and regulated by the 1940 Act, that account doesn't need to be reviewed by a credit officer: this step can be undertaken by an operations analyst. Similarly, AML compliance and corporate tax departments can establish rules and policies that enable KYC and tax operations teams to conduct this part of the onboarding process. In situations where a new account is being added to an existing agreement, an operations analyst can ensure the correct capacity and authority is in place and that no special provisions are being requested, thereby negating the need for costly legal resources. 

By operationalizing pro forma or low-risk activities, sell-side firms not only minimize risk and accelerate the process, but they also reduce costs and conserve the energies of their most specialized, high-value departments and roles.

Formalized offboarding

Establishing a formal offboarding process that closes dormant accounts and removes entities from agreements once contractual obligations have been fulfilled is an essential step in building a more stable and efficient system.  

Onboarding in the spotlight

There is a growing recognition that onboarding is a key customer touchpoint and competitive advantage for the sell side, and that has thrust this long-neglected area into the spotlight. While every organization will need to identify the approaches and technologies that work for their unique environment, the best practices outlined above—including establishing a single point of contact, making bolder requests for client data and automating low-risk events—offer a solid foundation on which to build a faster, more responsive onboarding process.