How can you improve your investor onboarding?

Investor onboarding (sometimes called the “engagement procedure”) refers to the information collected and the diligence carried out by an Asset Management Company (or “GP”) as part of entering into a relationship with a potential underwriter (or “LP”, “Limited Partner”).

These items, which are mainly related to regulatory obligations, may cover:
- the categorization of the subscriber,
- the definition of its sustainability objectives,
- the definition of a risk profile and the carrying out of an adequacy test,
- Know Your Customer & Anti Money Laudering (KYC-AML, or KYC-LCB-FT in French for Combating Money Laundering and the Financing of Terrorism).

This last point is an absolutely fundamental step for financial players, especially regulated ones. It makes it possible to verify the identity of their counterparties (investors, investment targets, suppliers, distributors, etc.) and to ensure the origin/destination of the invested capital. This is in order to prevent risks related to money laundering, terrorist financing, or any other illicit financial activities.

The onboarding procedure involves the collection and verification of numerous data and documents: proof of identity, proof of residence, criminal record extracts, registration certificates, status, various declarations, and certificates on the source of funds.

Why digitize investor onboarding?

Digitizing investor onboarding to improve the LP relationship

Obtaining a commit from an LP is the result of a long process, which requires the involvement of several teams (although Investor Relations are at the forefront, if you go back the chain, an entire organization is working to structure vehicles that will meet the expectations and objectives of investors).

However, the work does not end there. Once the commitment is obtained, the rest of the process should be quick, simple, and not tarnish the quality of the relationship that was sometimes difficult to create.

Therefore, how to avoid administrative complexity, the back and forth between different services and in particular compliance, and the multiple exchanges that tarnish the work done previously?

The implementation, through a Investor portal, a digital journey can be an excellent response to these challenges: digitized and intelligent forms replace .pdf files sent by email with multiple references to appendices, double entry disappears completely, the documentation is pre-filled, the documentation is pre-filled, signed automatically, and archived securely for all stakeholders.

In addition to the colossal time savings, it is also a major gain in fluidity for the LP (and for the GP).

Digitizing investor onboarding to reduce costs

The digitization of internal processes can have a very positive effect on the income statement of the structure that is being equipped.

In the case of onboarding, digitalization makes it possible to:
- create automated and autonomous information collection paths, which adapt dynamically according to the types of investors and their responses (professional or not, intermediated or not,...) thus avoiding human support by the Investor Relations teams,
- automatically manage error cases or correction needs,
or perform complex calculations (for example as part of scoring a risk profile) connect to a galaxy of tools to automate the sending of data to the 3rd parties that would be involved in the process.

This, without being sensitive to the concept of volume (whether you carry out 1 or 1,000 onboardings simultaneously is irrelevant — practical for setting up continuous monitoring) and by instantly and automatically generating personalized documentation that can be produced by the GP throughout the relationship.

These are all elements that until now had to be carried out by teams that can now focus on other subjects.

Digitizing investor onboarding to secure data

By digitizing the onboarding of your LPs, you store the data collected on a secure server. You also ensure that this data is accessible according to strict rules and authorizations; you can thus restrict access to the data to only authorized persons.

The digitization of paths also allows the collection of information and documents, directly within a secure environment, thus avoiding the exchange of sensitive information by email.

Digitizing investor onboarding to strengthen compliance

The use of a computer system makes it possible to set clear business rules in stone and thus avoid the risk of human error.

It also makes it possible to bring together all the stakeholders of a procedure within the same tool and to define workflows that cannot be exceeded (carrying out a 4-eye check, automatic initiation of an escalation procedure and providing information to the persons concerned based on a specific event).

In the context of KYC and AML due diligence, digitalization makes it possible in particular to connect to a galaxy of third-party tools to carry out additional due diligence in real time, for example:
- the screening of PPE databases, sanctions lists or asset freezes,
- the automated extraction of information contained in the requested documents (CNI, JDD,...),
- the analysis of these same documents to verify that they have not been falsified.

Finally, by carrying out all the processes through a digitized tool, whether it is the completion of information on the investor side or the completion of due diligence on the GP side, you have a complete and accessible audit trail at any time.

No need to document the verifications carried out in parallel with your due diligence, everything is already logged, sorted and archived. Traceability is thus complete.

How to digitize your investor onboarding?

Do you think your onboarding process can be improved? Several options are available to you.

Develop your own solution

In terms of digitalization, the development of a “homemade” solution is an option.

The advantage: you are in total control of the project and your procedures, you can model your solution 100% to your image.

The constraint: the necessary organization is cumbersome, it requires significant resources (mobilization of business teams, technical project management, development teams).

The use of external service providers (development agencies) can be a good solution in the short term, but a very significant cost in the long term: maintenance or change requests must be framed, quantified, implemented by third party service providers, which involves significant delays and costs and a loss of control of the subject.

Digitize portions of the journey

Do you want to test the advantages of the digital journey without investing too much time or money? With the help of no-code tools, you can improve your journeys with less effort.

For example, by digitizing the signature of your subscription forms using an electronic signature provider.

The advantage: the investment is minimal and you will get results very quickly, which is perfect for a proof of concept on the subject or to validate the interest of starting a project internally.

The constraint: the level of integration of such a solution will remain very low (e.g. the sole signature of the subscription form) and it will be difficult to reach the full potential of the gains sought.

Equip yourself with a space solution

There are many tools on the market, including Vasco, that digitize entry paths in relation to LPs.

The advantage: you can have a complete, integrated solution at a lower cost than in-house development. If you opt for a SaaS solution, scalable maintenance is generally integrated, so your product continues to evolve continuously.

The constraint: not all tools are the same, do not offer the same functionalities, and are not priced in the same way. Therefore, the choice can be complicated.

To move forward on this subject, we recommend that you look at questions such as: desired functional scope, native integrations with third-party providers, possible level of customization, billing model (in particular usage limits and possible variable costs), data access and security, data access and security, fluidity of paths and experience.

If you want to rely on a trusted third party to support you in this strategic subject, there are also many consultants or consulting firms that can assist you in this problem.