IPS Generation Time Cut by 75%: Automated Workflow for Customized Strategies

IPS Generation Time Cut by 75%: Automated Workflow for Customized Strategies

Executive Summary

Precision Financial, a growing Registered Investment Advisor (RIA) managing over $300 million in assets, faced a bottleneck in client onboarding due to the time-consuming process of manually creating Investment Policy Statements (IPS). By implementing an automated IPS generation tool tailored to their investment philosophy, Precision Financial reduced IPS generation time by 75%, freeing up advisors to implement investment strategies faster and ultimately manage more clients. This translated into quicker revenue generation and improved client satisfaction.

The Challenge

For Precision Financial, the initial client onboarding process was a significant drain on resources. Each Investment Policy Statement (IPS), the cornerstone document outlining a client's investment goals, risk tolerance, and investment strategy, took an advisor an average of four hours to create manually. This included gathering client information, analyzing their financial situation, developing a suitable asset allocation model, and drafting the IPS document itself.

"We were spending too much time on administrative tasks and not enough time on building relationships with clients and managing their portfolios," explains Lisa Thompson, CFP®, lead advisor at Precision Financial. "Each new client was taking almost half a day just to get the IPS drafted and approved. When you're targeting acquiring 2-3 new clients a month, those hours add up quickly."

This inefficient process translated into several key challenges:

• Delayed Investment Implementation: The lag time between the initial client meeting and the start of investment management was significant. Clients were eager to see their money working for them, and the delay was a potential source of frustration. Every week of delay potentially lost clients valuable opportunities for growth. For example, a client investing $500,000 could miss out on potential gains of $961.54 during the first week alone, assuming a hypothetical annual ROI of 10% (calculated daily).
• Limited Scalability: The manual IPS creation process made it difficult to scale the business. The time constraints limited the number of new clients each advisor could effectively manage, hindering growth potential. To sustain a growth rate of 15% year over year, Precision Financial needed a more efficient onboarding process.
• Difficulty in Customization at Scale: While Precision Financial prided itself on providing customized investment strategies, the manual process made it challenging to tailor each IPS to the client's specific needs and preferences. The advisors often relied on generic templates to save time, which compromised the level of personalization. Creating truly bespoke strategies that considered individual tax situations, philanthropic goals, and estate planning considerations was difficult within the existing workflow. Consider a high-net-worth client with $2 million to invest, the ability to tailor their investment strategy around specific tax-advantaged vehicles can have a significant impact on the after-tax value of their portfolio.
• Advisor Burnout: The tedious and time-consuming nature of manual IPS creation contributed to advisor burnout. Advisors felt overwhelmed with administrative tasks and less fulfilled in their roles, potentially impacting employee retention and overall team morale.

The Approach

Lisa spearheaded the initiative to find a technology solution that would streamline the IPS generation process. The team at Precision Financial carefully evaluated several software platforms, focusing on the following key criteria:

• Automation Capabilities: The platform needed to automate the population of key IPS sections based on client data, such as risk profiles, goals, and investment preferences.
• Customization Options: The platform should allow advisors to easily customize the IPS to reflect the client's unique circumstances and preferences.
• Integration with Existing Systems: The platform needed to integrate seamlessly with Precision Financial's existing CRM and portfolio management software.
• Compliance Features: The platform should include built-in compliance features to ensure that all IPS documents meet regulatory requirements.
• Ease of Use: The platform should be intuitive and easy for advisors to learn and use.

After a thorough evaluation, Precision Financial selected the RightCapital IPS generation module as the solution that best met their needs. The decision was driven by RightCapital's strong automation capabilities, flexible customization options, and seamless integration with their existing technology stack.

Lisa and her team then developed a strategic framework for implementing the new tool, including:

1. Customizing Templates: They worked with RightCapital to customize the IPS templates to align with Precision Financial's specific investment philosophy and brand standards. This involved incorporating their preferred asset allocation models, risk tolerance questionnaires, and disclosure language.
2. Workflow Optimization: They redesigned their client onboarding workflow to incorporate the automated IPS generation tool. This involved identifying the key data points needed to populate the IPS and streamlining the data collection process.
3. Advisor Training: They provided comprehensive training to all advisors on how to use the new tool effectively. This included hands-on workshops and ongoing support.
4. Continuous Improvement: They established a process for regularly reviewing and updating the IPS templates to ensure they remained accurate and aligned with the firm's evolving investment strategies.

Technical Implementation

Precision Financial implemented the RightCapital IPS generation module, leveraging its automation features to streamline the creation process. The technical implementation involved the following steps:

• Data Integration: RightCapital was integrated with Precision Financial's CRM system (Redtail CRM), allowing for seamless transfer of client data, including demographics, financial goals, and risk tolerance scores. This eliminated the need for manual data entry, reducing errors and saving time.
• Template Customization: The standard RightCapital IPS templates were customized to reflect Precision Financial's specific investment philosophy and brand. This included incorporating their proprietary asset allocation models, which are based on Modern Portfolio Theory and incorporate factors such as client risk tolerance, time horizon, and investment goals. The models typically consist of a diversified portfolio of equities, fixed income, and alternative investments.
• Risk Profiling Integration: Precision Financial's risk tolerance questionnaire, a key component of their client onboarding process, was integrated into the RightCapital platform. The questionnaire uses a points-based system to assess a client's risk appetite, generating a risk score that is automatically used to populate the IPS with a suitable asset allocation model. For example, a client with a high-risk score might be allocated a portfolio with 80% equities and 20% fixed income, while a client with a low-risk score might be allocated a portfolio with 40% equities and 60% fixed income.
• Workflow Automation: Automated workflows were established within RightCapital to streamline the IPS generation process. When a new client is added to the CRM system, an IPS is automatically created in RightCapital. The system then populates the IPS with the client's data, risk score, and a recommended asset allocation model.
• Compliance Automation: The RightCapital platform includes built-in compliance features, such as automated disclosure statements and audit trails. This helped Precision Financial ensure that all IPS documents meet regulatory requirements and reduce the risk of compliance violations.
• API Integration: RightCapital's open API allowed integration with their portfolio management software (Orion Advisor Tech), allowing the approved IPS investment strategy to be easily implemented in the client's brokerage account.

The calculations involved in determining the appropriate asset allocation for each client are based on Modern Portfolio Theory (MPT). MPT uses historical data and statistical analysis to determine the optimal mix of assets that will maximize returns for a given level of risk. The calculations take into account factors such as asset class correlations, expected returns, and standard deviations. For instance, Precision Financial uses a proprietary algorithm to calculate the efficient frontier for each client, which represents the set of portfolios that offer the highest expected return for each level of risk.

Results & ROI

The implementation of the RightCapital IPS generation module yielded significant results for Precision Financial:

• Reduced IPS Generation Time: The most dramatic improvement was a 75% reduction in IPS generation time. What previously took an average of four hours now takes just one hour.
• Increased Advisor Capacity: With the time saved on IPS creation, advisors were able to take on more clients. Each advisor's capacity increased by approximately 25%, allowing the firm to grow its client base without hiring additional staff. This allowed one senior advisor to service 30 new clients in a given year instead of the previous 20.
• Faster Investment Implementation: The faster IPS generation process enabled Precision Financial to implement investment strategies more quickly. The average time between the initial client meeting and the start of investment management decreased from two weeks to less than one week.
• Improved Client Satisfaction: Clients were impressed with the speed and efficiency of the onboarding process. The faster investment implementation and the personalized nature of the IPS document contributed to increased client satisfaction. Client surveys showed a 15% increase in client satisfaction scores related to the onboarding experience.
• Enhanced Customization: The automated tool allowed advisors to spend more time customizing the IPS to the client's specific needs and preferences. This resulted in more personalized investment strategies and improved client outcomes.
• Cost Savings: The increased efficiency and reduced administrative burden resulted in significant cost savings for Precision Financial. By freeing up advisors' time, the firm was able to generate more revenue without increasing overhead costs. A conservative estimate shows that the firm saved $10,000 per advisor per year in administrative costs.

Specifically, before implementation, Precision Financial onboarded approximately 60 new clients per year. After implementation, they onboarded approximately 75 clients per year, an increase of 25%. Given an average annual revenue of $5,000 per client, this translates to an additional $75,000 in revenue per year. This resulted in an ROI of 300% based on the software's initial cost.

Key Takeaways

Here are some key takeaways for other advisors considering implementing an automated IPS generation tool:

1. Prioritize Integration: Choose a platform that integrates seamlessly with your existing technology stack. This will streamline your workflow and prevent data silos.
2. Invest in Customization: Customize the IPS templates to align with your firm's specific investment philosophy and brand. This will ensure that the IPS documents reflect your firm's unique value proposition.
3. Provide Comprehensive Training: Ensure that all advisors are properly trained on how to use the new tool effectively. This will maximize its benefits and prevent frustration.
4. Focus on Workflow Optimization: Redesign your client onboarding workflow to incorporate the automated IPS generation tool. This will streamline the process and reduce bottlenecks.
5. Measure Your Results: Track key metrics, such as IPS generation time, client satisfaction, and revenue growth, to measure the ROI of the implementation.

About Golden Door Asset

Golden Door Asset builds AI-powered intelligence tools for RIAs. Our platform helps advisors automate client onboarding, personalize investment strategies, and improve portfolio performance. Visit our tools to see how we can help your practice.