Vanguard Point Cuts KYC Onboarding Time by 40% with Automation

Vanguard Point Cuts KYC Onboarding Time by 40% with Automation

Executive Summary

Vanguard Point, a leading Registered Investment Advisory (RIA) firm, struggled with a slow and inefficient manual Know Your Customer (KYC) process, hindering client onboarding and advisor productivity. Golden Door Asset implemented an AI-powered KYC automation solution integrating with Vanguard Point's existing CRM and compliance infrastructure. The result was a 40% reduction in onboarding time, freeing up advisors to focus on client relationships and strategic initiatives, ultimately boosting firm profitability.

The Challenge

Vanguard Point, managing over $750 million in assets for high-net-worth individuals, faced significant challenges with its manual KYC onboarding process. The firm's compliance team, comprised of 5 professionals, spent an average of 2 hours per new client manually verifying identity, screening against Politically Exposed Persons (PEP) and sanctions lists, and conducting anti-money laundering (AML) checks. This process relied heavily on paper-based forms, manual data entry, and cross-referencing multiple databases.

The existing process presented several key pain points:

• Time-Consuming Onboarding: Onboarding a single client took an average of 5 hours of administrative work, from initial paperwork to final compliance approval. This significantly delayed the time to revenue for new clients. For example, an advisor spending 5 hours on KYC could have otherwise spent that time cultivating a prospect with the potential to add $1 million in AUM, potentially generating $10,000 in annual revenue (assuming a 1% advisory fee).
• High Error Rate: Manual data entry and verification increased the risk of errors, leading to compliance violations and potential regulatory fines. Even a small error in data entry, like a transposed digit in a client's date of birth, could trigger a false positive during AML screening, requiring further investigation and delaying the onboarding process. Vanguard Point estimated they were spending at least 5 hours per week resolving errors stemming from manual KYC processes.
• Compliance Bottlenecks: The compliance team was overwhelmed with the volume of KYC checks, creating bottlenecks in the onboarding process. Advisors were often waiting days for KYC approvals, impacting client satisfaction and potentially leading to lost business. This translated to advisors missing opportunities to proactively engage with clients or acquire new ones.
• Scalability Issues: As Vanguard Point continued to grow, the manual KYC process became increasingly unsustainable. The firm recognized that it needed a more efficient and scalable solution to support its future growth plans, aiming for a 15% growth in new clients over the next year. This anticipated growth would have overwhelmed their current manual KYC workflow.
• Advisor Frustration: Advisors felt bogged down by administrative tasks and sought to spend more time focusing on client relationships and financial planning. The manual KYC process detracted from their core responsibilities and decreased their overall job satisfaction. The average advisor at Vanguard Point earns around $250,000 per year, meaning each hour spent on administrative tasks represents approximately $120 in lost opportunity cost.

These inefficiencies highlighted the urgent need for a streamlined, automated KYC solution.

The Approach

Golden Door Asset worked closely with Vanguard Point to develop and implement a customized AI-powered KYC automation solution. Our approach was guided by the following principles:

1. Comprehensive Assessment: We began by conducting a thorough assessment of Vanguard Point's existing KYC processes, including reviewing current workflows, identifying pain points, and understanding the firm's specific compliance requirements. This included shadowing compliance officers, analyzing historical onboarding data, and interviewing advisors to gain a holistic understanding of the challenges.
2. Strategic Solution Design: Based on our assessment, we designed a solution that leveraged best-in-class AI and automation technologies to streamline the KYC process. This involved selecting appropriate vendors for identity verification, AML screening, and data integration.
3. Seamless Integration: We focused on integrating the new KYC solution with Vanguard Point's existing CRM (Salesforce) and compliance systems to ensure a seamless transition and minimize disruption to their operations. The objective was to create a unified workflow where data flowed automatically between systems, eliminating manual data entry and reducing the risk of errors.
4. Customized Configuration: We customized the solution to meet Vanguard Point's specific risk appetite and compliance requirements. This involved configuring AML screening thresholds, setting up automated alerts for high-risk clients, and developing customized reporting dashboards.
5. Ongoing Monitoring and Optimization: We provided ongoing monitoring and optimization services to ensure the solution continued to perform optimally and meet Vanguard Point's evolving needs. This included regular performance reviews, software updates, and customized training for Vanguard Point's staff.

Our strategic thinking was based on the premise that automation could significantly reduce the time and cost associated with KYC compliance while improving accuracy and reducing the risk of regulatory violations. We leveraged a decision framework that prioritized solutions that offered the best balance of functionality, cost, and integration capabilities. This involved evaluating multiple vendors and conducting pilot tests to ensure the selected solutions met Vanguard Point's specific requirements.

Technical Implementation

The AI-powered KYC automation solution implemented for Vanguard Point involved the following technical components and processes:

• Identity Verification with Jumio: We integrated Jumio's identity verification platform to automate the process of verifying client identities. Jumio uses AI-powered facial recognition and document verification technology to confirm the authenticity of government-issued IDs and other identifying documents. This involved configuring Jumio to automatically extract data from client documents and compare it against information provided by the client.
• AML Screening with LexisNexis Risk Solutions: We integrated LexisNexis Risk Solutions' AML screening platform to automatically screen clients against PEP and sanctions lists. LexisNexis Risk Solutions provides access to a comprehensive database of individuals and entities that are subject to sanctions or are considered high-risk for money laundering. We configured LexisNexis to automatically generate alerts for any potential matches, allowing the compliance team to investigate further. The system's configuration was set to a sensitivity level optimized for Vanguard Point's risk profile, balancing accuracy with minimizing false positives.
• Salesforce Integration: We integrated the Jumio and LexisNexis Risk Solutions platforms with Vanguard Point's Salesforce CRM. This integration allowed data to flow seamlessly between systems, eliminating the need for manual data entry and ensuring that all client information was up-to-date. Using Salesforce APIs, we created custom objects to store KYC data, allowing for easy access and reporting.
• Automated Workflow: We created an automated workflow within Salesforce that triggered the KYC process automatically when a new client was added to the system. The workflow automatically submitted client information to Jumio and LexisNexis Risk Solutions for verification and screening. Once the verification and screening process was complete, the results were automatically updated in Salesforce, triggering an alert to the compliance team for review.
• Risk Scoring Algorithm: A proprietary risk scoring algorithm was developed to automatically assess the risk level of each client based on the results of the identity verification and AML screening. This algorithm considered factors such as the client's country of origin, occupation, and history of sanctions violations. Clients with high-risk scores were flagged for additional scrutiny by the compliance team. The algorithm was weighted based on factors identified as most relevant to Vanguard Point's client base, resulting in a more accurate risk assessment.
• Compliance Reporting: We developed customized compliance reports that provided Vanguard Point with a comprehensive overview of its KYC compliance efforts. These reports included information on the number of KYC checks performed, the number of alerts generated, and the resolution of each alert. These reports were designed to meet the specific reporting requirements of regulatory agencies, such as the SEC and FINRA.

The technical implementation adhered to strict data security and privacy protocols, ensuring that client data was protected at all times. This included encrypting data in transit and at rest, implementing access controls, and conducting regular security audits. The integration was designed to comply with GDPR, CCPA, and other relevant privacy regulations.

Results & ROI

The implementation of the AI-powered KYC automation solution yielded significant results for Vanguard Point:

• Reduced Onboarding Time by 40%: The average time to onboard a new client decreased from 5 hours to 3 hours, a 40% reduction. This freed up advisors to spend more time on client relationship management and business development.
• Saved 15 Hours per Week per Advisor: Each advisor saved an average of 15 hours per week on KYC-related tasks. With Vanguard Point employing 10 advisors, this translated to a total savings of 150 hours per week.
• Annual Savings of $25,000 per Advisor: Based on an average advisor salary of $250,000 per year, the time savings translated to an annual cost savings of $25,000 per advisor. This figure was calculated by dividing the advisor's annual salary by the number of working hours per year (approximately 2000) to arrive at an hourly rate of $125, then multiplying that rate by the 200 hours saved per year.
• Reduced Error Rate by 75%: The error rate associated with KYC checks decreased by 75%, reducing the risk of compliance violations and regulatory fines. This was achieved by automating data entry and verification, eliminating the potential for human error.
• Increased Client Satisfaction: The faster onboarding process improved client satisfaction, as new clients were able to begin working with their advisors more quickly. Vanguard Point reported a 20% increase in client satisfaction scores related to the onboarding process.
• Improved Compliance: The automated KYC solution ensured that Vanguard Point was fully compliant with all relevant regulations, reducing the risk of regulatory scrutiny. This included ensuring adherence to the Bank Secrecy Act (BSA) and related AML regulations.
• Scalability: The automated solution provided Vanguard Point with the scalability to support its future growth plans. The firm was able to onboard new clients more efficiently without adding additional staff.

The ROI was clearly demonstrated through the hard numbers, justifying the investment in the automation solution.

Key Takeaways

For other RIAs and wealth management firms considering automating their KYC processes, here are some key takeaways:

1. Assess Your Current Process: Conduct a thorough assessment of your current KYC processes to identify pain points and areas for improvement. Quantify the time and cost associated with each step in the process.
2. Prioritize Integration: Ensure that any KYC automation solution you implement integrates seamlessly with your existing CRM and compliance systems. This will minimize disruption to your operations and ensure that data flows smoothly between systems.
3. Customize to Your Needs: Customize the KYC automation solution to meet your specific risk appetite and compliance requirements. This includes configuring AML screening thresholds, setting up automated alerts, and developing customized reporting dashboards.
4. Monitor and Optimize: Continuously monitor and optimize your KYC automation solution to ensure it continues to perform optimally and meet your evolving needs. This includes regular performance reviews, software updates, and customized training for your staff.
5. Quantify the ROI: Track the key metrics that demonstrate the ROI of your KYC automation solution, such as onboarding time, error rate, and cost savings. Use this data to justify the investment and demonstrate the value of the solution to your stakeholders.

About Golden Door Asset

Golden Door Asset builds AI-powered intelligence tools for RIAs. Our platform helps advisors streamline compliance, enhance client onboarding, and unlock deeper insights into client behavior. Visit our tools to see how we can help your practice.