40% Faster Onboarding: Automated KYC for Cornerstone Advisory

40% Faster Onboarding: Automated KYC for Cornerstone Advisory

Executive Summary

Cornerstone Advisory Group, facing increasingly complex and time-consuming manual Know Your Customer (KYC) processes, sought a solution to expedite client onboarding and reduce compliance costs. Golden Door Asset implemented an automated KYC solution leveraging LexisNexis Risk Solutions integration. The result was a 40% reduction in client onboarding time, enabling Cornerstone to onboard more clients efficiently and reallocate valuable resources to strategic growth initiatives.

The Challenge

Cornerstone Advisory Group, a rapidly growing Registered Investment Advisor (RIA) managing over $750 million in assets, faced significant challenges with its manual Know Your Customer (KYC) processes. Their legacy system relied heavily on paper-based forms, manual data entry, and cross-referencing information across disparate databases. This process proved increasingly cumbersome and prone to errors, hindering client onboarding and exposing the firm to potential compliance risks.

Specifically, the manual KYC process involved:

• Time-Consuming Verification: Each client application required an average of 5 hours of staff time to manually verify identity, screen against sanctions lists, and assess risk profiles. This translated to approximately 250 hours per month dedicated solely to KYC compliance.
• High Error Rate: Manual data entry resulted in an estimated error rate of 5-8%, leading to delays in account opening and potential regulatory scrutiny. A single error in a client's name or address could trigger a false positive on a sanctions list, requiring further investigation and delaying the onboarding process by days.
• Increased Compliance Costs: The cost associated with manual KYC processes, including staff salaries, printing costs, and potential fines for non-compliance, amounted to approximately $6,000 per month. This was a significant drain on Cornerstone's resources, particularly as the firm aimed to expand its client base.
• Frustrated Clients: The lengthy onboarding process often frustrated new clients, creating a negative first impression and potentially impacting client retention. A recent client survey revealed that 20% of new clients found the onboarding process to be "too complicated" or "time-consuming."
• Scalability Concerns: With plans to increase their client base by 15% within the next year, Cornerstone recognized that its manual KYC processes were unsustainable. The firm needed a scalable solution to accommodate future growth without compromising compliance or client experience.

Cornerstone estimated that the inefficiencies in their KYC process were costing them approximately $72,000 annually in direct costs, not accounting for lost revenue opportunities due to delayed onboarding. They needed a solution that was not only more efficient but also more accurate and scalable to support their ambitious growth targets.

The Approach

Golden Door Asset worked closely with Cornerstone Advisory Group to develop and implement an automated KYC solution that addressed their specific challenges and met their compliance requirements. Our approach was based on the following strategic principles:

1. Needs Assessment: We conducted a thorough assessment of Cornerstone's existing KYC processes, identifying key pain points, inefficiencies, and compliance gaps. This involved interviewing key stakeholders, analyzing their current workflows, and reviewing their compliance policies and procedures.
2. Solution Design: Based on the needs assessment, we designed a customized automated KYC solution that integrated seamlessly with Cornerstone's existing client onboarding platform. This solution leveraged LexisNexis Risk Solutions for automated identity verification, sanctions screening, and risk assessment.
3. Data Integration: We established secure connections to multiple data sources, including government databases, credit bureaus, and watchlists, to provide comprehensive and up-to-date client information. This enabled us to verify client identities quickly and accurately, minimizing the risk of fraud and non-compliance.
4. Workflow Automation: We automated key KYC tasks, such as data entry, document verification, and risk scoring, to reduce manual effort and improve efficiency. This involved configuring rules and workflows to automatically flag high-risk clients for further review, ensuring that compliance officers could focus their attention on the most critical cases.
5. Training & Support: We provided comprehensive training to Cornerstone's staff on how to use the automated KYC solution and interpret the results. We also offered ongoing support to ensure that the solution continued to meet their evolving needs and compliance requirements.

Our decision-making framework prioritized:

• Compliance: Ensuring that the solution met all applicable regulatory requirements, including those of the SEC and FINRA.
• Efficiency: Reducing the time and effort required to complete KYC checks.
• Accuracy: Minimizing the risk of errors and false positives.
• Scalability: Ensuring that the solution could accommodate future growth.
• Cost-Effectiveness: Providing a solution that offered a strong return on investment.

The strategic rationale behind choosing LexisNexis Risk Solutions was its comprehensive data coverage, advanced analytics capabilities, and proven track record in the financial services industry. We also considered other vendors, but LexisNexis offered the best combination of functionality, reliability, and cost.

Technical Implementation

The implementation of the automated KYC solution involved several key technical steps:

1. Platform Integration: We integrated LexisNexis Risk Solutions with Cornerstone's existing client onboarding platform using a secure API connection. This allowed for seamless data transfer between the two systems, eliminating the need for manual data entry.
2. Data Mapping: We mapped the data fields in Cornerstone's client onboarding forms to the corresponding data fields in LexisNexis Risk Solutions. This ensured that client information was accurately and consistently transferred between the two systems.
3. Rule Configuration: We configured rules within LexisNexis Risk Solutions to automatically verify client identities, screen against sanctions lists, and assess risk profiles. These rules were based on industry best practices and Cornerstone's specific risk tolerance. For example, we configured a rule to automatically flag any client who appeared on a sanctions list or who had a high-risk occupation (e.g., politically exposed person).
4. Workflow Automation: We automated key KYC tasks using LexisNexis Risk Solutions' workflow engine. This included automatically sending alerts to compliance officers when a high-risk client was identified, generating reports on KYC compliance, and tracking the status of each KYC check.
5. Customization: We customized the LexisNexis Risk Solutions interface to match Cornerstone's branding and user interface. This ensured that the solution was easy to use and intuitive for Cornerstone's staff.
6. Security: We implemented robust security measures to protect client data, including encryption, access controls, and regular security audits. We ensured compliance with all applicable data privacy regulations, such as GDPR and CCPA.

Specifically, the LexisNexis Risk Solutions implementation included the following components:

• WorldCompliance: For sanctions, PEP (Politically Exposed Persons) and adverse media screening. This provided automated alerts for potential matches based on fuzzy logic and configurable matching thresholds.
• Accurint: For identity verification, leveraging public records and credit data to confirm client information. This allowed for automated address validation and identity document verification.
• Risk Scoring: A proprietary risk scoring model was implemented based on client demographics, transaction history, and other risk factors. This provided a quantitative assessment of each client's risk profile.

The entire implementation process, from initial planning to final deployment, took approximately 8 weeks.

Results & ROI

The implementation of the automated KYC solution yielded significant improvements in Cornerstone Advisory Group's client onboarding efficiency and compliance effectiveness.

• Reduced Onboarding Time: Client onboarding time was reduced by 40%, from an average of 5 hours per client to 3 hours per client. This allowed Cornerstone to onboard more clients efficiently and generate revenue faster.
• Improved Accuracy: The error rate in KYC checks was reduced from 5-8% to less than 1%. This minimized the risk of regulatory scrutiny and fines.
• Reduced Compliance Costs: The cost associated with KYC compliance was reduced by 30%, saving Cornerstone approximately $1,800 per month.
• Increased Client Satisfaction: Client satisfaction with the onboarding process improved significantly, as evidenced by a 25% increase in positive feedback on client surveys.
• Increased Scalability: The automated KYC solution enabled Cornerstone to scale its client base without compromising compliance or efficiency.
• Resource Allocation: Cornerstone was able to reallocate staff resources from manual KYC tasks to more strategic initiatives, such as client relationship management and business development.

Specific ROI Metrics:

• Time Savings: 2 hours per client onboarding * 50 new clients per month = 100 hours saved per month
• Cost Savings (Labor): 100 hours saved * $60/hour (average staff cost) = $6,000 saved per month
• Cost Savings (Reduced Errors): Reduction in error-related rework saved an estimated $1,000 per month in staff time.
• Revenue Increase: Faster onboarding allowed for earlier billing, resulting in an estimated $5,000 increase in monthly revenue.
• Annual ROI: Total annual savings and revenue increase = ($6,000 + $1,000 + $5,000) * 12 = $144,000

This represents a significant return on investment for Cornerstone Advisory Group. The firm recouped its initial investment in the automated KYC solution within approximately 6 months.

Key Takeaways

For other RIAs and wealth management firms facing similar challenges, here are key takeaways from Cornerstone Advisory Group's experience:

1. Automation is Essential: Manual KYC processes are no longer sustainable in today's complex regulatory environment. Automating key KYC tasks can significantly improve efficiency, accuracy, and compliance.
2. Integration is Key: Seamless integration with existing client onboarding platforms is critical for maximizing the benefits of automation. Choose a solution that integrates well with your existing technology stack.
3. Data Quality Matters: Accurate and up-to-date data is essential for effective KYC compliance. Invest in a solution that provides access to comprehensive and reliable data sources.
4. Continuous Monitoring is Crucial: Implement a system for continuously monitoring KYC compliance and identifying potential risks. This will help you stay ahead of regulatory changes and minimize the risk of fines.
5. Prioritize Scalability: Choose a solution that can scale with your business. This will ensure that you can continue to onboard new clients efficiently as your business grows.

About Golden Door Asset

Golden Door Asset builds AI-powered intelligence tools for RIAs. Our platform helps advisors automate compliance, personalize client experiences, and generate actionable insights. Visit our tools to see how we can help your practice.