The democratization of wealth management: increasing demand for complex products drives increasing onboarding complexity

Investors are increasingly investing in more complex financial products. Even the mass affluent investor no longer relies on exchange-traded funds and mutual funds, opting instead for alternatives, structured products, and even art and other non-bankable assets.

Recent ThoughtLab research, Wealth and Asset Management 4.0: How digital, social, and regulatory shifts will transform the industry, highlights preferences of very-high-net-worth (VHNW) investors and the mass affluent, revealing there are no significant differences. Demand for alternatives (69%), tax-exempt investments (59%), structured products (26%), and art (16%) among the mass affluent is, in fact, quite similar to that shown by VHNW investors.

With more complex products, however, also come more significant regulatory challenges. A major obstacle to wealth management firms offering this type of elaborate product to the low-risk, mass-affluent market is ensuring that documentation and processes are accurate. Documentation needs to be filled in correctly early on, at the onboarding stage, to avoid not-in-good-order applications (NIGOs) — where documents must be resubmitted to the investor due to errors or omissions. NIGOs cause client dissatisfaction, and most importantly, can lead to compliance issues.

Add to this other areas of wealth management where intricacies are increasing, such as disaggregated systems and service processes, remote work environments, or evolving investor expectations, and it becomes clear that investor onboarding is becoming far too complex to be managed manually or with paper-based tools.

The industry outlook suggests that wealth managers must be able to orchestrate increasingly complex processes. These include connecting disconnected people, data, and systems to provide a smooth experience for the client while maximizing efficiencies for the front and back offices without sacrificing compliance. Manual, paper-based systems simply do not allow this level of accuracy and reliability as they introduce potential human error into an already complex process.

FNZ's seamless digital onboarding experience plays a vital role in streamlining processes to make them faster and more compliant. Not only is collecting data right the first time key to delivering a simple, intuitive, and efficient first impression but it can also help reduce risk for wealth management firms and banks that are poised to tap into the burgeoning mass affluent market.