Aite Group's September 2012 survey entitled "Account Opening Pain Points in the Front Office," found that a number of firms' account opening processes are delayed by inefficiencies and lack of communication between operations, compliance and brokers. Hamstrung by paperwork, a lack of integration and processing errors, firms are losing clients, money and even advisors as the clock ticks away on new accounts.
"It's really the first time the client has a structured interaction with the institution," Tom Wieczorek, vice president, products, at NexJ, a Toronto-based customer relationship management (CRM) software provider, says. "That's when you really establish a relationship, establish trust and discover additional products and services that you can provide to the client."
The account opening process, which occurs when a new client comes in or an existing client wants to open up an IRA or annuity account, was once thought of as a "back office function in need of cost-containing," the Aite Group survey done last year has found. In that July 2011 survey entitled "Wealth Management and Onboarding: Beyond Account Opening," the Boston-based consulting firm found that only 30% of wealth management home offices viewed it as a competitive differentiator.
As a result, many firms were stuck in a "two-fold state of the universe," Wieczorek says.
"Either the advisor had to log into the back office system directly to enter the data or more typically, it was just all done through paper," Wieczorek adds. "The advisor would have a whole bunch of account opening forms. He would meet with the client, fill out the forms in pen, get the client to sign them and go through the whole compliance process."
That legacy continues to bedevil broker-dealers. According to the most recent Aite Group survey, 20% of advisors who responded said that it still takes more than two days to completely open up an account, whether that be a new account such as an IRA or annuity or bringing on a new client and another 20% of advisors said they lose clients during account opening and almost half (48%) of those who left said it was because it was taking too long.
"Waiting a few days for a brokerage account to open may have been acceptable a decade ago, but today these timelines are incongruous alongside the real-time account opening capabilities of online brokerage firm," Aite's most recent report stated. "An account opening cycle time of more than two days is becoming a disadvantage and potentially an indicator to investors that the firm may not have the best technology infrastructure."
And regulations, such as suitability rules, which took effect this July and raised the threshold of knowledge an advisor must have about a client before recommending an investment product, have only added to the due diligence requirements, Wieczorek says. "In the past we were very much hunting firms," he says. "But over the past year or so, dynamics have changed a little bit, and it's mostly because of expected regulation. We're seeing a lot of regulations in the [United Kingdom] because they are much more ahead, which is forcing banks to adopt a system so they can audit and prove contact with an advisor, and U.S. clients are starting to think the same way."
After a number of focus groups and interviews with advisors and branch managers, Janney Montgomery Scott, with assistance from undisclosed outside vendors, is rolling out its integrated System for Maintaining And Retaining Transaction (SMART) this year. SMART aims to integrate the front office and back office by combining the advisor's normal CRM (data gathered during initial client meetings) with the compliance department workflow.
"During that period of time we learned that just because of the inflow of work coming in that we needed to improve a couple things," says Chris Munafo, head of Janney's Client Group Administration. "It's about the client experience. The first part was the account opening system."
The software addresses four primary areas that advisors who participated in the Aite Group survey reported as priorities: electronic submission of paperwork, client e-signature, minimizing data entry and improving systems integration.
One of the main benefits of that system is that it reduces the potential for errors or missing details that can keep an account from opening. According to the Aite report, 56% of clients who did not make it past the account opening process left because an error took too long to fix.