40% Faster Onboarding: Automated Compliance Checks

40% Faster Onboarding: Automated Compliance Checks

Executive Summary

Pacific Ridge Wealth Management faced significant bottlenecks during client onboarding due to manual compliance checks, hindering advisor productivity and client satisfaction. By implementing an automated system integrating World-Check One with their CRM, Pacific Ridge streamlined Know Your Customer (KYC) and Anti-Money Laundering (AML) screenings. This automation resulted in a 40% reduction in onboarding time, allowing advisors to dedicate more time to client relationships and driving new business.

The Challenge

For Pacific Ridge Wealth Management, a growing RIA firm managing over $500 million in assets, client onboarding had become a major operational hurdle. The firm’s compliance team, consisting of three dedicated individuals, was spending an average of 8 hours per new client manually screening for KYC and AML compliance.

This manual process involved painstakingly cross-referencing client information against various databases, including sanctions lists, Politically Exposed Persons (PEP) lists, and adverse media sources. Each database required a separate login, search, and review process, creating significant inefficiencies. This process was not only time-consuming but also prone to human error, potentially exposing the firm to regulatory risks and penalties.

The problem manifested itself in several critical ways:

• Extended Onboarding Times: On average, it took 20 hours of combined administrative and advisor time to fully onboard a new client. This delay meant that advisors were unable to immediately begin managing the client’s assets, impacting potential investment gains and client satisfaction.
• Reduced Advisor Productivity: Advisors spent valuable time chasing down missing information and clarifying discrepancies, diverting their attention from revenue-generating activities like client meetings and portfolio management. Each advisor estimated spending 4 hours per new client on compliance-related tasks, totaling over 40 hours per month. At an average advisor billable rate of $300 per hour, this translated to $12,000 in lost revenue opportunity per advisor per month.
• Increased Operational Costs: The reliance on manual processes necessitated a larger compliance team, increasing overhead costs. Furthermore, the risk of compliance breaches due to human error could lead to substantial fines and reputational damage. One near-miss incident involving a potential PEP connection cost the firm an additional $5,000 in legal fees to investigate and resolve.
• Negative Client Experience: The lengthy onboarding process frustrated new clients, who expected a seamless and efficient experience. The constant requests for additional documentation and clarifications created a negative first impression, potentially impacting long-term client retention. Client surveys revealed that 15% of new clients cited onboarding delays as a concern.

The firm recognized that this outdated process was unsustainable and hindering its growth potential. A more efficient and automated solution was needed to streamline compliance checks, reduce operational costs, and improve the client experience.

The Approach

Pacific Ridge recognized the need for a paradigm shift in their compliance procedures. Their leadership team decided on a two-pronged approach:

1. Centralize and Automate Compliance Checks: The primary objective was to consolidate all compliance checks into a single, automated system. This involved integrating a robust KYC/AML screening tool with the firm's existing Customer Relationship Management (CRM) system, Salesforce.
2. Implement a Risk-Based Approach: Rather than applying the same level of scrutiny to every client, the firm decided to adopt a risk-based approach. This meant prioritizing clients with higher risk profiles for more thorough screening, while streamlining the process for low-risk clients.

The firm considered several KYC/AML screening solutions before selecting World-Check One, a comprehensive risk intelligence database from Refinitiv (now part of LSEG). World-Check One offered several key advantages:

• Extensive Database: The database contains information on millions of individuals and entities linked to financial crime, terrorism, and other illicit activities.
• Real-Time Monitoring: The system continuously monitors client profiles for changes in their risk status, alerting the compliance team to any potential red flags.
• Customizable Screening Rules: The firm could configure the system to align with its specific risk tolerance and regulatory requirements.
• Seamless Integration: World-Check One offered a robust API for integration with the firm's Salesforce CRM, ensuring a smooth and automated workflow.

The decision framework involved assessing the cost of implementation versus the projected ROI in terms of time savings, reduced operational costs, and mitigated compliance risks. A detailed cost-benefit analysis projected that the automation would pay for itself within the first year. The leadership team also considered the qualitative benefits of improved client experience and enhanced regulatory compliance.

Technical Implementation

The technical implementation involved a phased approach, with close collaboration between the firm's IT team, the compliance team, and the World-Check One integration specialists.

1. API Integration: The World-Check One API was integrated with the firm's Salesforce CRM. This involved creating custom Apex code to map client data fields in Salesforce to the corresponding fields in the World-Check One database. The integration was designed to be triggered automatically whenever a new client record was created in Salesforce.

2. Data Mapping and Standardization: A crucial step was to ensure that client data was accurately and consistently mapped between Salesforce and World-Check One. This involved standardizing data formats and implementing validation rules to prevent errors. For example, the client's name, address, and date of birth were carefully mapped to the corresponding fields in World-Check One.

3. Rule Configuration: The compliance team configured the system to apply specific screening rules based on the firm's risk-based approach. This included setting thresholds for acceptable risk scores and defining the criteria for automatically escalating cases to the compliance team for further review. For instance, any client with a risk score above 70 (on a scale of 0-100) would automatically trigger an alert.

4. Workflow Automation: The integration automated several key steps in the onboarding process. When a new client record was created in Salesforce, the system automatically initiated a World-Check One screening. The results of the screening were then displayed directly within the client's Salesforce record, providing advisors and compliance staff with immediate access to critical risk information. Cases with potential red flags were automatically routed to the compliance team for further investigation.

5. Training and Documentation: The firm conducted extensive training for advisors and compliance staff on how to use the new system. This included training on how to interpret the screening results, how to escalate cases, and how to document their findings. Comprehensive documentation was also created to provide a reference for future use.

The initial integration took approximately 6 weeks to complete, including testing and refinement. The firm invested approximately $20,000 in the initial setup and integration costs, with an ongoing subscription fee for World-Check One.

Results & ROI

The implementation of automated compliance checks yielded significant improvements across several key metrics:

• Reduced Onboarding Time: The most significant result was a 40% reduction in client onboarding time. The average time to onboard a new client decreased from 20 hours to 12 hours. This freed up advisors to focus on revenue-generating activities and improve client satisfaction.

• Increased Advisor Productivity: Advisors reported a significant increase in productivity, with an average of 3 additional client meetings per week. This translated to an estimated $3,600 increase in revenue per advisor per month (3 meetings x $1,200 average revenue per meeting).

• Reduced Operational Costs: The automation reduced the workload on the compliance team, freeing up their time for other critical tasks. The firm estimated a 25% reduction in compliance-related administrative costs, saving approximately $15,000 per year.

• Improved Client Experience: The streamlined onboarding process resulted in a significant improvement in client satisfaction. Client surveys showed an 80% satisfaction rate with the onboarding process, compared to 65% before the automation.

• Mitigated Compliance Risks: The automated system provided a more thorough and consistent screening process, reducing the risk of compliance breaches. The real-time monitoring capabilities also allowed the firm to proactively identify and address potential risks. The firm avoided a potential $10,000 fine related to a delayed PEP screening, as the system alerted them within hours instead of days.

The return on investment (ROI) was substantial. The initial investment of $20,000 was recouped within the first six months due to increased advisor productivity and reduced operational costs. The firm estimates that the automation will generate an annual ROI of over 200%.

Key Takeaways

1. Automation is Essential: Automating compliance checks is no longer a luxury but a necessity for RIAs seeking to improve efficiency, reduce costs, and mitigate risks.
2. Integration is Key: Seamless integration between your KYC/AML screening tool and your CRM system is crucial for maximizing the benefits of automation.
3. Risk-Based Approach is More Efficient: Implementing a risk-based approach allows you to focus your resources on the highest-risk clients, streamlining the process for low-risk clients.
4. Thorough Training is Vital: Ensure that advisors and compliance staff are properly trained on how to use the new system and interpret the screening results.
5. Quantify the ROI: Before investing in automation, conduct a thorough cost-benefit analysis to quantify the potential ROI in terms of time savings, reduced costs, and mitigated risks.

About Golden Door Asset

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