Investment advisors, wealth managers, and other fiduciaries understand that client expectations have changed dramatically in the past decade. Highly secured paperless transactions enabled by digital signatures promise to improve experiences for financial professionals and clients alike by eliminating process friction and ensuring compliance during the critical onboarding process.
Read on to learn more.
How It's Always Been Done
To be sure, no one ever really enjoyed the traditional onboarding process. Its scheduling complexities and endless stacks of paper seem increasingly anachronistic in a world accustomed to quick and efficient signup processes, even for sensitive financial transactions like opening a new bank account or trading shares.
Traditional, paper-based onboarding was a particular pain for financial advisors, whose compliance burdens amplified . Not only were paper and printer ink ongoing, often egregious expenses, they were infuriatingly slow. Worst of all, the smallest misstep or simplest human error in form completion or signature collection could result in the dreaded "Not In Good Order" stamp from compliance officers at the clearing house, leading to costly rework and terrible experiences for everyone involved.
Technology to the Rescue
To avoid this paper-based pain, technology innovators like Pershing and Docupace began to champion straight-through processing for compliance-burdened broker-dealers and RIAs. Straight-through processing promised to eliminate the implicit inefficiencies associated with paper-based workflows, allowing advisors more time to provide better service to clients. Nowhere would this improved experience be more beneficial than during new client onboarding, when paperwork load and process friction were at their zeniths.
Despite the evident cost and time benefits of straight-through processing, the most highly regulated corners of the financial services industry remained patient in their adoption of the practice. Ink and paper, while expensive and increasingly anachronistic, were also trusted, durable, and successful. To adopt straight-through processing, however promising the benefits might be, broker-dealers and RIAs would need absolute trust in the security of digital documents and, most importantly, the electronic signatures that made the agreements legal and binding.
Straight-Through Processing: a Dramatically Better Experience
Let's take a look at the traditional onboarding process based on printed forms and wet-ink signatures:
The advisor must:
- Print all necessary forms
- Make copies for all signing parties
- Acquire wet-ink signatures on paper
- Schedule office time for onsite signing
- Post or ship forms to signing parties
- Post or ship forms to broker-dealer
- Correct any errors that result in NIGO rejections
- Could include complete rework
Even when this manual, paper-based process works correctly, it is unnecessarily slow, inconvenient, and expensive. Moreover, it relies on human oversight to ensure that records are complete, compliant, and legally durable, further increasing risks and costs.
When straight-through processing is utilized, the advisor:
- Pulls digital forms from a database, usually cloud-based
- Sends forms online to all parties for electronic signatures
- Parties sign anytime, anywhere, on their internet-connected devices
- Completed forms then sent electronically to broker-dealer
- Compliance ensured programmatically; NIGO chance is virtually nil
Traditional onboarding and straight-through processing necessarily require the same steps: form acquisition, signature collection, transfer to broker-dealer, and compliance review. However, at every inflection point that the paper-based process invites additional cost, wasted time, or opportunity for error, the digital process provides speed, convenience, and—critically—almost guaranteed compliance. By literally writing compliance processes into the software code that governs electronic document and signature, there is no chance that form bundles will be submitted to the broker-dealer without every signature and initial; the software literally won't allow the error.
By mitigating or removing the costs, complications, and compliance risks of traditional onboarding, straight-through processing offers speed and convenience to new clients and allows advisors to repurpose administrative time into the quality service that represents the true value of the advisor-client relationship. It's an undeniably better experience for everyone involved.
Choosing the Right E-Signature
E-signatures are the linchpins of straight-through processing and all paperless workflows. If a document's signature isn't valid, then neither is the document itself; it cannot bind, enforce, or defend the terms it contains. Most e-signatures meet the basic requirements of E-SIGN and UETA, the two pieces of legislation that define legality for electronic signatures and transactions.
Highly regulated industries like financial services, however, must ensure more than mere legality. Wealth managers, for instance, deal with complicated, long-lived financial products like trusts and annuities and must be able to validate or defend those agreements for decades or generations. For the fiduciary, a contract must not only be legally binding, but legally durable.
True digital signatures provide the enhanced security and privacy necessary not just to meet legal standards, but actually enhance compliance and legal durability in the event that a contract is challenged. You can read more about the benefits of digital signatures vs. electronic signatures elsewhere on this blog. The takeaway for financial professionals is that the SIGNiX platform brings the security benefits of true digital signatures and makes them accessible to regular computer users through seamless integrations with leading software providers in the financial services space. As of the publishing of this article, 22 of the top 50 independent broker-dealers in the United States use SIGNiX digital signatures.
The Future of Client Onboarding is Now
With a rapidly changing client base and a disruptive digital economy, fiduciaries can no longer afford—literally and figuratively—to rely on slow, costly workflows that irritate clients. Efficiency and a frictionless experience are important in all financial services operations, but particularly so during the critical onboarding phase. When a client has agreed to enter into a relationship with an advisor, it is not only smart business to move quickly, but moreover a better practice to safely and efficiently secure formal agreements and begin offering the service and value that will build strong relationships and mutual success for generations.