Increased Suitability Documentation Efficiency by 25%

Increased Suitability Documentation Efficiency by 25%

Executive Summary

New Horizons Wealth Management faced significant challenges in documenting client suitability, relying on time-consuming manual processes prone to inconsistencies and potential compliance gaps. Golden Door Asset provided a solution by automating the suitability documentation process through a digital questionnaire integrated with their existing Salesforce CRM. This resulted in a 25% increase in documentation efficiency, freeing up advisors to focus on client relationships and business development.

The Challenge

For New Horizons Wealth Management, a growing RIA managing over $500 million in assets, client suitability documentation was a major pain point. Their process, heavily reliant on paper forms and manual data entry, was both inefficient and susceptible to errors. Each advisor spent an average of 6 hours per new client onboarding, primarily on documenting risk tolerance, investment goals, and financial circumstances. This translated to approximately 30 hours per week across the firm dedicated solely to compliance paperwork.

The manual process created several critical problems:

• Inconsistent Data Capture: Paper-based questionnaires often resulted in incomplete or ambiguous answers, requiring advisors to spend valuable time clarifying information with clients. This led to inconsistencies in how suitability was assessed across different clients.
• Risk of Errors: Manually transferring data from paper forms to their CRM (Salesforce) was prone to human error, potentially leading to inaccurate client profiles and unsuitable investment recommendations. An estimated 5% of client files contained discrepancies that required correction, adding further administrative burden.
• Compliance Concerns: Given the increasing regulatory scrutiny surrounding suitability, particularly with the Department of Labor's fiduciary rule, the manual process posed a significant compliance risk. The lack of standardized documentation made it difficult to demonstrate a consistent and thorough suitability assessment process during audits. A single compliance violation related to suitability could cost the firm upwards of $50,000 in fines, not to mention reputational damage.
• Lost Productivity: The time spent on manual documentation detracted from advisors' ability to engage with clients, build relationships, and prospect for new business. Assuming an advisor bills at a rate of $300 per hour, the 30 hours a week lost to paperwork represented a potential loss of $9,000 in billable time per week for the firm. This meant New Horizons was potentially missing out on $468,000 per year in revenue due to inefficient documentation processes.

Furthermore, the existing method lacked the ability to easily track changes in client circumstances over time. This made it difficult to proactively identify potential suitability issues and adjust investment strategies accordingly. For example, a client experiencing a significant life event, such as a job loss or unexpected medical expense, might have a different risk tolerance than initially documented, potentially requiring a shift in their portfolio allocation. The inability to readily capture and analyze these changes created a significant blind spot for the firm.

The Approach

To address these challenges, New Horizons partnered with Golden Door Asset to implement an automated suitability documentation solution. The approach centered around the following key steps:

1. Needs Assessment: Golden Door Asset conducted a thorough assessment of New Horizons' existing suitability documentation process, identifying key pain points and opportunities for improvement. This included interviewing advisors, reviewing current documentation procedures, and analyzing data on the time spent on compliance-related tasks.
2. Digital Questionnaire Design: A custom digital questionnaire was designed to capture all necessary information for assessing client suitability, including risk tolerance, investment goals, time horizon, financial situation, and any relevant life events. The questionnaire incorporated branching logic to tailor questions based on individual client responses, ensuring a more efficient and personalized data collection process.
3. Riskalyze Integration: Riskalyze, a leading risk tolerance assessment platform, was integrated into the questionnaire. This allowed for a standardized and objective measurement of each client's risk tolerance using a quantitative risk score. The Riskalyze score provided a valuable benchmark for aligning investment recommendations with client preferences.
4. Salesforce Integration: The digital questionnaire was seamlessly integrated with New Horizons' Salesforce CRM system. This allowed data captured in the questionnaire to be automatically populated into client profiles, eliminating the need for manual data entry and reducing the risk of errors.
5. Workflow Automation: An automated workflow was created within Salesforce to trigger a review of client suitability documentation based on pre-defined events, such as a significant market downturn or a change in client circumstances. This ensured that client suitability was continuously monitored and updated as needed.
6. Advisor Training: Golden Door Asset provided comprehensive training to New Horizons advisors on how to use the new automated system. This included hands-on training sessions and ongoing support to ensure that advisors were comfortable and confident in using the new tools.

The strategic thinking behind this approach was to leverage technology to streamline the suitability documentation process, improve data accuracy, and enhance compliance while simultaneously freeing up advisors to focus on client relationships and business development. The decision framework prioritized a solution that was both user-friendly and integrated with New Horizons' existing technology infrastructure.

Technical Implementation

The technical implementation involved the following key components:

• Digital Questionnaire: The questionnaire was built using Salesforce's native features, allowing for easy customization and integration with other Salesforce modules. The questionnaire included a combination of multiple-choice questions, open-ended text fields, and numerical input fields to capture a comprehensive range of client information.
• Riskalyze API Integration: The Riskalyze API was used to integrate the risk tolerance assessment into the questionnaire. When a client completed the risk tolerance section, their Riskalyze Risk Number was automatically generated and stored in Salesforce. This allowed advisors to quickly and easily see a client's risk tolerance level and use it as a basis for investment recommendations. The Risk Number calibration was configured to a 95% confidence interval, ensuring statistically sound results.
• Salesforce Data Model: The Salesforce data model was customized to include new fields and objects to store the data collected from the questionnaire. This included fields for risk tolerance score, investment goals, time horizon, financial situation, and any other relevant information.
• Automated Workflow: A Salesforce workflow rule was created to trigger a review of client suitability documentation whenever certain conditions were met, such as a significant market downturn (e.g., a 10% drop in the S&P 500) or a change in client circumstances (e.g., a change in employment status). The workflow rule would automatically assign a task to the advisor to review the client's suitability documentation and update it as needed.
• Calculations: The system was also programmed to automatically calculate key financial metrics, such as the client's net worth, income, and debt-to-income ratio, based on the information provided in the questionnaire. These calculations were used to assess the client's financial situation and determine their ability to take on risk. We implemented formulas within Salesforce utilizing standard financial calculations to avoid any external or unsupported modules. This included calculations for:
  • Required Rate of Return: Using the client's financial goals and time horizon, the system calculated the required rate of return needed to achieve those goals.
  • Capital Needs Analysis: Assessing the client's future financial needs, such as retirement income or college expenses, and determining the amount of capital required to meet those needs.
  • Asset Allocation Modeling: Based on the client's risk tolerance and investment goals, the system generated a recommended asset allocation model, showing the percentage of assets that should be allocated to different asset classes, such as stocks, bonds, and real estate.

Results & ROI

The implementation of the automated suitability documentation solution yielded significant results for New Horizons Wealth Management:

• Increased Documentation Efficiency: The time spent on documenting client suitability was reduced by 25%, from an average of 6 hours per new client to 4.5 hours. This freed up advisors to spend more time with clients and prospect for new business.
• Reduced Errors: The number of errors in client files was reduced by 80%, from an estimated 5% to 1%. This improved data accuracy and reduced the risk of compliance violations.
• Enhanced Compliance: The standardized documentation process made it easier to demonstrate a consistent and thorough suitability assessment process during audits. This reduced the risk of compliance fines and reputational damage.
• Improved Client Experience: The digital questionnaire provided a more engaging and personalized experience for clients. Clients appreciated the streamlined process and the ability to provide their information online.
• Increased Revenue Potential: By freeing up advisors to spend more time with clients and prospects, the automated solution helped New Horizons increase its revenue potential. The firm estimates that it can generate an additional $150,000 in revenue per year as a result of the increased efficiency.
• Time Savings: The 25% reduction in documentation time translates to roughly 7.5 hours per week per advisor. Multiplying this by the number of advisors and their average billing rate results in substantial cost savings and increased billable hours. The team estimated these time savings to be valued at $117,000 annually.

In summary, the automated suitability documentation solution provided a significant return on investment for New Horizons Wealth Management, improving efficiency, reducing errors, enhancing compliance, and boosting revenue potential.

Key Takeaways

Here are some actionable insights for other advisors considering automating their suitability documentation process:

1. Prioritize Integration: Choose a solution that integrates seamlessly with your existing CRM system to avoid data silos and streamline workflows.
2. Customize the Questionnaire: Tailor the digital questionnaire to capture the specific information you need to assess client suitability, and use branching logic to personalize the experience.
3. Leverage Risk Tolerance Tools: Incorporate a standardized risk tolerance assessment tool like Riskalyze to provide an objective measurement of client risk preferences.
4. Automate Workflows: Create automated workflows to trigger reviews of client suitability documentation based on pre-defined events or changes in client circumstances.
5. Invest in Training: Provide comprehensive training to your advisors on how to use the new automated system to ensure they are comfortable and confident in using the tools.

About Golden Door Asset

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