40% Faster Advisor Onboarding with KYC Automation
Executive Summary
Precision Financial, a rapidly growing Registered Investment Advisory (RIA) firm, struggled with a slow and inefficient advisor onboarding process due to manual Know Your Customer (KYC) procedures. Golden Door Asset implemented an AI-powered KYC solution, automating identity verification, background checks, and risk assessment. As a result, Precision Financial reduced advisor onboarding time by 40%, enabling them to onboard an additional 10 advisors per year and capture an estimated $3 million in incremental revenue.
The Challenge
Precision Financial manages over $5 billion in assets under management (AUM) and aims to aggressively expand its advisor network to reach a wider client base. However, their manual KYC onboarding process was a significant bottleneck, hindering growth.
Before implementing automation, onboarding a single advisor took an average of 5 weeks. This included:
- Manual Document Collection and Verification: Advisors had to physically submit a multitude of documents (licenses, certifications, background checks, financial disclosures) which were then manually reviewed by compliance staff. This process alone consumed approximately 2 weeks of labor per advisor, costing the firm an estimated $2,000 per onboarding in administrative overhead.
- Time-Consuming Background Checks: Conducting thorough background checks, including verifying credentials, running criminal record checks, and screening against watchlists, was a laborious process that often took 1-2 weeks. The reliance on traditional databases and manual searching made the process prone to errors and delays.
- Inefficient Adverse Media Screening: Screening potential advisors for adverse media coverage (e.g., regulatory violations, fraud allegations) was done manually, relying on web searches and subscription databases. This process was not only time-consuming but also lacked the comprehensiveness needed to identify potential risks.
- Lost Revenue Opportunities: The lengthy onboarding process meant that new advisors couldn't start generating revenue for the firm quickly. With an average advisor generating $300,000 in annual revenue, each week of delay in onboarding translated to approximately $5,769 in lost revenue opportunity per advisor.
- Compliance Risks: The manual nature of the process increased the risk of human error, potentially leading to compliance violations and regulatory scrutiny. Failure to properly screen advisors could result in significant fines and reputational damage.
Specifically, one near miss involved an advisor who omitted a past disciplinary action from their initial application. The omission was only discovered late in the onboarding process during a manual adverse media search, leading to a wasted 3 weeks of compliance team effort and requiring immediate termination of the application.
The inefficient onboarding process not only increased operational costs but also limited Precision Financial's ability to scale its advisor network and capitalize on growth opportunities.
The Approach
Golden Door Asset worked closely with Precision Financial's compliance team to develop a tailored KYC automation solution that addressed their specific challenges. The approach involved:
- Process Assessment: We conducted a thorough assessment of Precision Financial's existing advisor onboarding process, identifying bottlenecks and areas for improvement. This involved interviewing key stakeholders, reviewing existing documentation, and analyzing data on onboarding times and costs.
- Solution Design: Based on the process assessment, we designed an AI-powered KYC solution that automated key steps in the onboarding process, including identity verification, background checks, and risk assessment. The solution was designed to integrate seamlessly with Precision Financial's existing systems and workflows.
- Technology Selection: We carefully selected best-in-class technology partners to provide the core functionalities of the KYC automation solution.
- Trulioo: Selected for its robust identity verification capabilities, allowing for real-time verification of advisor identities against global databases.
- Dow Jones Risk & Compliance: Selected for its comprehensive adverse media screening and watchlist monitoring capabilities, providing real-time alerts on potential risks.
- API Integration: We developed custom API integrations to connect Trulioo and Dow Jones Risk & Compliance with Precision Financial's internal systems, ensuring seamless data flow and real-time updates.
- Workflow Automation: We automated the KYC workflow using a rules-based engine, defining specific criteria for triggering automated checks and escalating potential risks to compliance staff. This allowed the compliance team to focus on high-risk cases while automating routine tasks.
- Training and Support: We provided comprehensive training to Precision Financial's compliance team on how to use the new KYC automation solution. We also provided ongoing technical support to ensure smooth operation and continuous improvement.
- Iterative Optimization: The solution was designed to be iteratively optimized based on ongoing data analysis and feedback from Precision Financial's compliance team. We continuously monitored the performance of the system and made adjustments as needed to ensure optimal efficiency and accuracy.
The strategic thinking behind this approach was to reduce human intervention in routine KYC tasks, allowing the compliance team to focus on higher-value activities such as risk assessment and due diligence. This not only improved efficiency but also enhanced the overall quality of the onboarding process.
Technical Implementation
The technical implementation of the KYC automation solution involved the following steps:
- API Integration with Trulioo: A custom API integration was developed to connect Precision Financial's advisor onboarding portal with Trulioo's identity verification service. When a new advisor submitted their application, the system automatically sent relevant data (name, address, date of birth) to Trulioo for verification against global databases. Trulioo returned a verification score and flagged any discrepancies, such as mismatched data or potential fraud indicators.
- API Integration with Dow Jones Risk & Compliance: A separate API integration was developed to connect the onboarding portal with Dow Jones Risk & Compliance's adverse media screening service. The system automatically screened new advisor applications against Dow Jones' extensive database of news articles, regulatory filings, and sanctions lists. The system generated a risk score based on the severity and frequency of adverse media hits.
- Rules-Based Engine: A rules-based engine was implemented to automate the KYC workflow. The engine was configured with specific rules based on Precision Financial's risk tolerance and regulatory requirements. For example, any advisor with a high-risk score (e.g., due to adverse media coverage or a criminal record) was automatically flagged for manual review by the compliance team.
- Data Storage and Security: All KYC data was stored securely in a centralized database with access controls to ensure data privacy and compliance with regulatory requirements. Data was encrypted both in transit and at rest using industry-standard encryption algorithms.
- Reporting and Analytics: The system generated detailed reports on KYC metrics, such as onboarding times, verification rates, and risk scores. These reports provided valuable insights into the performance of the KYC automation solution and helped identify areas for improvement. The reporting also helped maintain compliance with FINRA and SEC regulations.
- Calculation of Onboarding Time Reduction: The system tracked the time elapsed between application submission and onboarding completion, automatically calculating the reduction in onboarding time compared to the pre-automation baseline of 5 weeks.
- Calculation of Incremental Revenue: Using data on advisor productivity and revenue generation, the system estimated the incremental revenue generated by onboarding advisors faster.
The API integrations were built using RESTful APIs with JSON data format. The rules-based engine was implemented using a combination of Python scripting and database stored procedures. The system was deployed on a secure cloud infrastructure with robust security measures in place.
Results & ROI
The implementation of the KYC automation solution yielded significant results for Precision Financial:
- Advisor Onboarding Time Reduced by 40%: The average advisor onboarding time decreased from 5 weeks to 3 weeks, a reduction of 40%. This freed up valuable time for the compliance team to focus on higher-value tasks.
- Increased Advisor Onboarding Capacity: Precision Financial was able to onboard an additional 10 advisors per year thanks to the faster onboarding process. This increase in capacity allowed the firm to expand its advisor network and reach a wider client base.
- Estimated $3 Million in Incremental Revenue: The additional 10 advisors onboarded per year are projected to generate $3 million in incremental revenue for Precision Financial. This represents a significant return on investment for the KYC automation solution. (Assumes each advisor generates $300,000 in annual revenue.)
- Reduced Compliance Costs: The automation of KYC tasks reduced the administrative burden on the compliance team, resulting in a 25% reduction in compliance costs. This translates to an annual cost savings of approximately $50,000.
- Improved Compliance Posture: The comprehensive nature of the KYC automation solution improved Precision Financial's compliance posture, reducing the risk of regulatory violations and fines.
- Reduced Risk of Fraud: The automated identity verification and adverse media screening processes significantly reduced the risk of onboarding fraudulent or high-risk advisors. The automated system flagged 3 potentially problematic advisors in the first year, preventing significant reputational and financial risk to the firm.
Before implementation, Precision Financial was onboarding approximately 25 advisors annually. With the 40% time saving and increased efficiency, they were able to increase this to 35 advisors in the following year. This represents a 40% increase in onboarding velocity, directly attributable to the Golden Door Asset solution.
Key Takeaways
- Automate repetitive tasks: Identify manual, repetitive tasks in your advisor onboarding process and automate them using AI-powered tools. This will free up valuable time for your compliance team to focus on higher-value activities.
- Integrate data sources: Integrate different data sources (e.g., identity verification, background checks, adverse media screening) into a centralized platform to streamline the KYC process. This will provide a more comprehensive view of potential risks.
- Implement rules-based workflows: Implement rules-based workflows to automate the KYC process based on specific criteria. This will ensure consistency and reduce the risk of human error.
- Prioritize data security: Prioritize data security and compliance with regulatory requirements when implementing KYC automation solutions. Choose solutions that offer robust security measures and comply with industry best practices.
- Continuously monitor and optimize: Continuously monitor the performance of your KYC automation solution and make adjustments as needed to ensure optimal efficiency and accuracy. This will help you stay ahead of emerging risks and regulatory changes.
About Golden Door Asset
Golden Door Asset builds AI-powered intelligence tools for RIAs. Our platform helps advisors streamline compliance processes and accelerate growth. Visit our KYC automation tools to see how we can help your practice.