Improved Custodian Setup Accuracy by 25% with Automation

Improved Custodian Setup Accuracy by 25% with Automation

Executive Summary

Luminary Wealth Partners, a rapidly growing RIA managing over $500 million in assets, faced significant challenges with manual custodian account setup. The process was prone to errors, leading to delays in funding new client accounts and potentially impacting investment timelines. By implementing Sophia, Golden Door Asset's AI-powered onboarding solution, Luminary automated key data entry and validation steps, resulting in a 25% improvement in custodian setup accuracy and a significant reduction in funding delays.

The Challenge

Luminary Wealth Partners prides itself on providing exceptional client service and personalized investment strategies. However, their rapid growth exposed inefficiencies in their client onboarding process, particularly in the manual setup of custodian accounts. This process, involving platforms like Schwab Advisor Center and Fidelity Wealthscape, relied heavily on manual data entry from client application forms into the custodian's systems.

The reliance on manual data entry introduced several significant challenges:

• High Error Rate: With hundreds of data points to enter for each client account (name, address, social security number, beneficiaries, investment objectives, etc.), the potential for human error was substantial. Luminary estimated that approximately 12% of all new account setups contained at least one error requiring correction. These errors ranged from simple typos to incorrect account titling, and even misplaced decimal points in contribution limits which have caused delays in funding the accounts.
• Funding Delays: Errors in account setup inevitably led to delays in funding new client accounts. Each error required identification, correction, and resubmission to the custodian, often adding days or even weeks to the funding process. One specific example involved a high-net-worth client looking to allocate $2 million across various equity positions. A simple typographical error in the account beneficiary information caused a delay of 7 days, forcing the client to miss a crucial market opportunity. Based on historical data, Luminary estimated that these delays collectively cost their clients an average of $150,000 annually in missed investment opportunities.
• Operational Inefficiency: The manual account setup process consumed a significant amount of time and resources for Luminary's operations team. Each account took approximately 45 minutes to set up manually. With an average of 20 new accounts per month, this translated to 15 hours of labor dedicated solely to account setup. The time spent correcting errors further compounded the inefficiency.
• Client Frustration: Delays in funding and account setup created frustration among new clients, potentially damaging Luminary's reputation and client relationships. Clients were often anxious to see their investments begin generating returns, and delays in the onboarding process undermined their confidence in Luminary's capabilities. One client, frustrated by a two-week delay, almost withdrew his $500,000 account before the error was rectified.
• Compliance Risk: Inaccurate account information increased the risk of compliance violations, particularly concerning KYC (Know Your Customer) and AML (Anti-Money Laundering) regulations. Inaccurate beneficiary information can also cause significant tax implications for clients and Luminary if the error goes unnoticed.

The Approach

Luminary Wealth Partners recognized the need to streamline their onboarding process and address the challenges associated with manual custodian account setup. After evaluating several solutions, they selected Golden Door Asset's Sophia for its AI-powered automation capabilities and seamless integration with existing custodian platforms.

The approach involved a multi-faceted strategy:

1. Data Extraction and Validation: Sophia automatically extracted data from client application forms using Optical Character Recognition (OCR) technology. This eliminated the need for manual data entry and significantly reduced the risk of typos and other errors.
2. Custodian API Integration: Sophia integrated directly with custodian APIs (e.g., Schwab Advisor Center, Fidelity Wealthscape) to automate account opening and data validation. This allowed for real-time verification of data against custodian records and immediate identification of any discrepancies.
3. Automated Workflow: Sophia automated the entire account setup workflow, from data extraction to account opening. The system automatically populated account applications with extracted data, validated the information against custodian requirements, and submitted the applications for approval.
4. Exception Handling: Sophia flagged any errors or discrepancies for review by Luminary's operations team. However, instead of requiring manual correction, Sophia provided clear and concise instructions on how to resolve the issue, significantly reducing the time required for remediation.
5. Rule-Based Automation: Sophia was configured with specific rules based on custodian guidelines and regulatory requirements. For example, Sophia could automatically ensure that all required fields were completed, that beneficiary designations met specific requirements, and that investment objectives aligned with the client's risk profile. This eliminated the need for manual review of these critical elements.

The decision framework was driven by the need to balance cost, efficiency, and compliance. Luminary prioritized a solution that could not only reduce errors and delays but also integrate seamlessly with their existing technology infrastructure and meet stringent regulatory requirements. They also considered the long-term scalability of the solution and its ability to adapt to changing custodian requirements.

Technical Implementation

The technical implementation of Sophia involved several key steps:

• API Integration: Sophia established secure connections to the custodian APIs using industry-standard security protocols (e.g., OAuth 2.0). These APIs provided access to custodian data and functionalities, including account opening, data validation, and transaction processing. The custodians used were Schwab Advisor Center and Fidelity Wealthscape.
• Data Mapping: Sophia utilized a sophisticated data mapping engine to translate data from client application forms into the format required by the custodian APIs. This involved mapping fields such as name, address, social security number, and investment objectives to their corresponding fields in the custodian's data structure.
• OCR Engine: The OCR engine was trained to accurately extract data from various types of client application forms, including scanned documents and PDFs. The engine was continuously updated and refined to improve its accuracy and handle new form formats.
• Rules Engine: The rules engine was configured with a comprehensive set of rules based on custodian guidelines and regulatory requirements. These rules were written in a flexible and extensible format, allowing for easy modification and adaptation to changing requirements.
• Alerting and Reporting: Sophia provided real-time alerts and reports on the status of each account setup, including any errors or discrepancies that required attention. These reports were accessible through a user-friendly dashboard, providing Luminary's operations team with a comprehensive overview of the onboarding process.
• Security: Security was paramount throughout the implementation. Data was encrypted both in transit and at rest using AES-256 encryption. Access to Sophia was restricted to authorized personnel through role-based access control. Regular security audits were conducted to ensure compliance with industry best practices.

The system was deployed on a secure cloud-based infrastructure, ensuring high availability and scalability. The technical team at Golden Door Asset worked closely with Luminary's IT staff to ensure a seamless integration with their existing systems. Calculations for error rate were performed by tracking the number of accounts requiring manual intervention divided by the total accounts opened in a specific period. Funding delay calculations were based on comparing the target funding date with the actual funding date.

Results & ROI

The implementation of Sophia yielded significant improvements in Luminary Wealth Partners' custodian account setup process:

• Improved Accuracy: Custodian setup accuracy improved by 25%, from an error rate of 12% to 9%.
• Reduced Funding Delays: The average time to fund new accounts decreased by 60%, from an average of 5 days to 2 days. This enabled clients to begin investing their assets sooner and capitalize on market opportunities. This represents roughly a 3 day turnaround time from the previous timeline.
• Increased Efficiency: The time required to set up a new account decreased by 50%, from 45 minutes to 22.5 minutes. This freed up valuable time for Luminary's operations team to focus on other tasks, such as client service and relationship management.
• Cost Savings: The reduction in errors and delays resulted in significant cost savings for Luminary. By reducing the time spent correcting errors and expediting the funding process, Luminary estimates that they saved approximately $20,000 per year in operational costs. The improvement in investment timelines also prevented approximately $37,500 in missed opportunity cost.
• Enhanced Client Satisfaction: Clients reported higher levels of satisfaction with the onboarding process. The faster funding times and reduced errors contributed to a more positive client experience, strengthening Luminary's reputation and client relationships. Specifically, client satisfaction scores, measured through post-onboarding surveys, increased by 15%.

Here's a table summarizing the key results:

Key Takeaways

The success of Luminary Wealth Partners' implementation of Sophia offers several valuable takeaways for other RIAs and wealth managers:

1. Automation is Essential: Automating manual tasks, such as data entry and validation, is crucial for improving efficiency, reducing errors, and enhancing the client experience.
2. Integration is Key: Seamless integration with existing custodian platforms is essential for a successful automation implementation. APIs provided by the custodians are crucial for achieving this level of integration.
3. Focus on Exception Handling: A well-designed exception handling process is critical for ensuring that errors and discrepancies are identified and resolved quickly and efficiently.
4. Security is Paramount: Security should be a top priority throughout the implementation process. Data should be encrypted both in transit and at rest, and access to the system should be restricted to authorized personnel.
5. Measure and Track Results: It's important to measure and track the results of any automation initiative to ensure that it is delivering the desired benefits. Track key metrics such as error rates, funding delays, and client satisfaction to assess the impact of the automation.

About Golden Door Asset

Golden Door Asset builds AI-powered intelligence tools for RIAs. Our platform helps advisors streamline their operations, enhance client experiences, and drive growth. Visit our tools to see how we can help your practice.