Client onboarding processes in need of overhaul says new report

8 June 2021

Provider processes for client onboarding should be overhauled to bring down costs and drive efficiencies, a new report by NextWealth for Origo has found.

NextWealth said a key issue facing advisers is the Letter of Authority process due to the lack of standardisation among providers.

Heather Hopkins, managing director of NextWealth said advisers complained of delays and the significant time needed to bring on each client.

“Of the 10 steps we identified in the report to onboard clients, without exception advisers complained most about the Letter of Authority. Every financial advice firm we interviewed described delays and frustrations, resulting in workarounds and extra unnecessary steps. One of the main problems is that the information requested is not standardised, meaning several different letters may need to be prepared for a single client, requiring significant additional time for rework. This all adds up to higher costs for clients and can also erode trust in our industry.”

According to NextWealth’s research, the cost to advisory firms to onboard a new client is £1,543, taking between three and four weeks to complete.

The research also found a significant disconnect between the timescales stated by advisers and providers. While providers claim the turnaround process takes days, advisers suggested the process can take weeks or even months. Delays occur when information is lost, forms are incorrectly completed or missing information or advisers have difficulty locating the right part of the business to contact.

Advisers also told NextWealth they have had to wait on hold for hours at a time as they try to get status updates on Letters of Authority sent weeks before.

Factors such as legacy systems, trustee involvement, illustration and application processes and requests for non-standard information can also negatively impact the length of the onboarding process.

However, providers that have embraced technology are faring better than their counterparts, with streamlined and speedier services, NextWealth said.

Anthony Rafferty, CEO of Origo, commented: “The broken LoA process risks confirming consumers’ worst opinions of our industry as archaic and out of touch. I have experienced first-hand this broken process. Early on in lockdown, my financial adviser drove to my house to get my signature on a few forms to support a pension transfer. The forms were mislaid after being sent to the provider and he had to come back again for another wet signature. We want to change that, to make the LOA process secure and slick.”

Rafferty added: The NextWealth research highlights that there are real personal costs and emotional implications caused by the current processes. Advisers don’t want clients to miss out on getting access to their money for retirement or to fund a child’s wedding because of needlessly slow processes.

Currently, it is the advice firms that bear the greater operational and reputational costs but the overall risk is to client confidence in financial services as a whole.

“We need to be working together to oust the outdated and put in place solutions that deliver the prompt, efficient operational processes that clients now expect of us as an industry.”

A copy of the report can be downloaded here:

Professional Paraplanner