Onboarding clients: How to avoid a bumpy ride
Relationship managers looking to join an independent portfolio manager or start their own business face a rocky road. Getting the client’s buy-in and completing the onboarding process is a real test, especially in today’s environment:
- Ever-changing regulatory requirements
- A general de-risking trend among custodian banks
- The roadblocks put up by banks in the form of fees and retention policies
Although onboarding clients will always be complex and time-consuming, the process itself shouldn’t be what stops you. Marcuard Heritage was founded by three bankers who decided their professional independence was more important than the stability of a large financial institution. They took a risk, but it paid off.
All of our relationship managers made the transition to independent wealth management. Here, we share what we have learned about onboarding clients, particularly in light of current challenges.
Onboarding clients is a real test in today’s environment, but we smooth it out and ensure success.
Understanding the complexity
Anyone in wealth management knows that the regulatory requirements have increased across many jurisdictions. Mandatory reporting and Know Your Customer (KYC) regulations are the source of many headaches and sleepless nights.
Today, we also see a general trend towards lower risk at custodial banks, especially due to the latest geopolitical shifts. Regional agendas across Europe, China, and the United States vary more widely than in the past.
Furthermore, with relationship managers increasingly interested in professional independence, banks have built up roadblocks, with fees and retention policies that make it more difficult to make the move.
Success starts with relationships and preparation
Relationship managers who want independence must have close and honest relationships with their clients and prepare well in advance.
The most important step is the buy-in. If you have built your client relationships on trust, integrity, and personal service, then you are in an excellent position to persuade your clients and give them peace of mind. You have an intimate understanding of each client’s individual situation, family dynamics, and long-term objectives. This allows you to serve them better. Offering this personal service from a single source, with you as the one point of contact, can create the continuity they need to make the move with you.
Solid preparation is arguably just as essential as the buy-in. By understanding the requirements and with support from an independent portfolio manager, you can keep your clients fully informed throughout every step of the process. Embrace your role as coordinator, corresponding with the various teams, such as the financial institution’s compliance department. This will prevent multiple exchanges and shuffling paperwork back and forth between the bank and the client.
Understanding your role and the importance of preparation goes a long way to ensuring that everything runs smoothly, especially the KYC compliance process.
Naturally, you need to make sure your actions are always in line with the applicable labour laws and contractual conditions of your current employer. The independent wealth manager you wish to join should be able to offer support in these areas.
Mastering the KYC conundrum
Many regulations have been around for years in the Swiss financial world and beyond. The requirements are well known, such as client identification, verification of the beneficial owner of held assets, and KYC information like source of funds and wealth corroboration. However, much has changed in the past 10-15 years, especially with regard to corroboration. The requirements are much more stringent.
Nowadays, KYC compliance requires a complete and accurate storyline, with the source of funds and wealth substantiated. At a minimum, supporting evidence must be shown to document significant events in the client’s career, such as influxes of cash. This means submitting contracts, tax forms, and inheritance documentation, to name a few. The data must validate the client’s total wealth figures. Furthermore, the client must complete formal documentation like portfolio management, fee agreements, risk profiles, etc.
Last but not least, the KYC storyline must be written in a way that is easy to understand so that a third party without prior knowledge of the client can follow it.
Onboarding at Marcuard Heritage
We would not be where we are today without successfully navigating the onboarding process many times over. With in-house support teams alongside risk and compliance experts, we are well-equipped to support the transition to independent wealth management and facilitate two parallel onboarding workflows – our own and the one with the respective custodian bank that will hold the client’s assets under custody. If needed, we also integrate external, independent business experts to help our relationship managers collect and properly communicate the client’s KYC story.
This parallel process is essential because it ensures we deliver the information the custodian bank needs to complete its due diligence and satisfy risk and compliance policies, which is especially useful for clients domiciled in a jurisdiction with a higher money laundering and terrorism financing risk assessment (ML/TF).
A close relationship with the client, solid preparation, and well-substantiated KYC will smooth out the bumps in the road and speed up the onboarding process.
Remember: KYC continues
It’s important to remember that the KYC process does not stop once we’ve onboarded a client. KYC regulations are in constant flux, requiring regular contact with the client and ongoing updates.
For example, the revision of the Swiss Anti-Money Laundering Act (AMLA) that came into effect on 1 January 2023 requires a regular review of all client relationships. This means routine KYC reviews, including the client documentation and clients’ basic data. The revision ensures financial institutions implement international ML/TF prevention measures, which also reinforces the high quality of service the Swiss financial sector is known for.
The key to success and a smooth ride
At Marcuard Heritage, client onboarding is a key process, and we have an established infrastructure to streamline it and assist new relationship managers across its many aspects, including the varying requirements of the custodian banks we work with.
It’s a process that has proven itself many times over – reducing complexity, ensuring compliance, and making the transition as smooth as possible.
If you want to avoid a bumpy ride on the road to independence, we encourage you to get in touch.