IPS Generation Time Reduced by 60% with Automation

IPS Generation Time Reduced by 60% with Automation

Executive Summary

Pacific Gate Capital, a growing RIA firm, faced a significant bottleneck in their client onboarding process due to the manual creation of Investment Policy Statements (IPS). This time-intensive process limited advisor capacity and hindered growth. By implementing an automated IPS generation tool integrated with their CRM and financial planning software, Pacific Gate Capital reduced IPS generation time by 60%, leading to a 20% increase in overall advisor productivity and improved client experience.

The Challenge

For Pacific Gate Capital, a firm managing over $350 million in assets, creating personalized Investment Policy Statements (IPS) was a labor-intensive undertaking. Before implementing an automated solution, advisors spent an average of 5 hours per client meticulously crafting each IPS from scratch. This process involved gathering client data from multiple sources, including CRM records, risk tolerance questionnaires, and financial planning software.

The manual approach presented several significant challenges:

• Time-Consuming Process: Each IPS required substantial research, writing, and formatting. With an average of 10 new clients per month, the team dedicated approximately 50 hours per month solely to IPS creation. This time could have been spent nurturing client relationships, pursuing new business opportunities, or focusing on higher-value advisory services.
• Inconsistency and Errors: Manual IPS creation was prone to human error. Inconsistencies in language, formatting, and investment recommendations could arise, especially when multiple advisors were involved. This lack of standardization posed compliance risks and undermined the firm's professional image. Imagine accidentally transposing a risk tolerance score leading to a misallocation of assets.
• Scalability Issues: As Pacific Gate Capital continued to grow, the manual IPS process became increasingly unsustainable. The firm risked reaching a point where they couldn't efficiently onboard new clients, potentially hindering their growth trajectory. This also meant potentially missing opportunities to scale revenue by an estimated $100,000 - $200,000 annually based on new client acquisition goals.
• Opportunity Cost: The significant time investment in IPS creation diverted advisors from higher-value activities. For instance, advisors were spending less time providing proactive portfolio reviews, resulting in potentially missed opportunities to optimize client portfolios and increase AUM. Even a slight increase in AUM from proactive portfolio reviews could translate into significant revenue gains for the firm.
• Compliance Burden: Manually ensuring that each IPS met regulatory requirements and reflected the client's specific financial situation was a constant challenge. The risk of non-compliance could result in penalties and reputational damage, potentially costing the firm tens of thousands of dollars in fines or legal fees.

The inefficient IPS generation process ultimately hindered Pacific Gate Capital's ability to scale their business, optimize advisor productivity, and deliver a consistently high-quality client experience.

The Approach

To address the challenges associated with manual IPS creation, Benjamin Chow, Chief Investment Officer at Pacific Gate Capital, spearheaded the implementation of an automated IPS generation solution. The strategic approach involved the following steps:

1. Needs Assessment: Benjamin conducted a thorough needs assessment to identify the specific pain points and requirements for an automated IPS solution. This involved gathering feedback from advisors, compliance officers, and operations staff to understand their workflows, data needs, and compliance considerations. The assessment revealed that the ideal solution should be able to:

   • Automatically populate client data from CRM and financial planning software.
   • Generate customized IPS documents based on pre-defined templates and client risk profiles.
   • Ensure compliance with regulatory requirements.
   • Be user-friendly and require minimal training.

2. Solution Selection: Based on the needs assessment, Benjamin evaluated several IPS generation tools, ultimately selecting RightCapital. RightCapital was chosen for its robust features, intuitive interface, and seamless integration capabilities with Pacific Gate Capital's existing technology infrastructure. RightCapital's open API and strong reputation within the RIA community were key factors in the decision.

3. Template Customization: The next step involved customizing the IPS templates within RightCapital to align with Pacific Gate Capital's brand standards, investment philosophy, and compliance requirements. This included:

   • Developing standardized language for investment objectives, risk tolerance, and asset allocation strategies.
   • Creating multiple template variations to accommodate different client profiles and investment goals.
   • Ensuring that all templates complied with regulatory requirements and firm policies.

4. Data Integration: A critical aspect of the implementation was integrating RightCapital with Pacific Gate Capital's CRM and financial planning software. This integration enabled the automatic synchronization of client data, eliminating the need for manual data entry and reducing the risk of errors. The integration was achieved through a combination of API connections and data mapping, ensuring that relevant client information, such as risk scores, investment goals, and financial data, was automatically populated into the IPS templates.

5. Training and Rollout: Once the IPS templates were customized and the data integration was complete, Benjamin conducted comprehensive training sessions for all advisors and support staff. The training covered how to use the RightCapital platform, generate IPS documents, and ensure compliance with firm policies. The rollout was phased, starting with a pilot group of advisors before being rolled out firm-wide.

6. Ongoing Optimization: Following the full rollout, Pacific Gate Capital continued to monitor and optimize the automated IPS generation process. This included collecting feedback from advisors, making adjustments to the templates and workflows, and ensuring that the solution remained aligned with evolving regulatory requirements. Regularly reviewing and updating the templates ensures continued compliance and relevance to the changing investment landscape.

The core strategic thinking behind this approach was to leverage technology to streamline a time-consuming process, improve data accuracy, and enhance the overall client experience. By automating IPS generation, Pacific Gate Capital aimed to free up advisor time, reduce compliance risks, and position the firm for continued growth.

Technical Implementation

The technical implementation of the automated IPS generation solution involved a combination of software integration, template customization, and data synchronization.

• Software Integration: Pacific Gate Capital utilized RightCapital for IPS generation. RightCapital was integrated with the firm's existing CRM system (Salesforce) and financial planning software (eMoney Advisor). This integration was crucial for seamless data flow and eliminating manual data entry. The integration was achieved through the use of RightCapital's API, allowing for secure and automated data transfer between the different systems. Specific API calls were used to retrieve client data from Salesforce and eMoney Advisor, including:
  • Client demographic information (name, address, contact details)
  • Financial data (income, assets, liabilities)
  • Risk tolerance scores (obtained through risk assessment questionnaires)
  • Investment goals (retirement planning, college savings, etc.)
• Template Customization: The IPS templates within RightCapital were customized to reflect Pacific Gate Capital's specific investment philosophy, brand standards, and compliance requirements. This involved:
  • Developing standardized language for investment objectives (e.g., "long-term growth," "income generation," "capital preservation").
  • Creating pre-defined asset allocation models based on different risk tolerance levels (e.g., conservative, moderate, aggressive).
  • Incorporating disclaimers and disclosures to ensure compliance with regulatory requirements.
  • Customizing the look and feel of the IPS document to match Pacific Gate Capital's branding. This included adding the firm's logo, colors, and font styles.
• Data Synchronization: The integration between RightCapital, Salesforce, and eMoney Advisor ensured that client data was automatically synchronized across all three systems. This eliminated the need for advisors to manually enter data into multiple systems, reducing the risk of errors and saving time. Data synchronization was achieved through a combination of API calls and data mapping. The system was configured to automatically update client data in RightCapital whenever changes were made in Salesforce or eMoney Advisor. The frequency of data synchronization was set to every 24 hours, with the option for manual synchronization as needed.
• Risk Tolerance Assessment Integration: The firm's risk tolerance questionnaire, embedded within their client portal, was directly linked to the RightCapital system. The scoring algorithm from the questionnaire automatically fed a risk score into the IPS generation tool, ensuring accurate and personalized asset allocation recommendations. The questionnaire used a validated methodology assessing both risk tolerance and risk capacity, generating a score from 1-10 (1 being extremely conservative and 10 being very aggressive).
• Compliance Checks: The customized templates included built-in compliance checks to ensure that each IPS met regulatory requirements and firm policies. These checks included:
  • Verifying that all required disclosures were included.
  • Ensuring that the asset allocation was appropriate for the client's risk tolerance and investment goals.
  • Checking for any potential conflicts of interest.
  • Alerting advisors to any potential compliance issues.
• Security Measures: Data security was a top priority. All data transmission between the systems was encrypted using SSL/TLS protocols. Access to the RightCapital platform was restricted to authorized personnel with appropriate security credentials. Regular security audits were conducted to ensure the ongoing protection of client data.

Results & ROI

The implementation of the automated IPS generation solution delivered significant results for Pacific Gate Capital:

• Reduced IPS Generation Time: The most significant result was a 60% reduction in IPS generation time. Prior to automation, advisors spent an average of 5 hours per client creating an IPS. With the automated solution, this time was reduced to an average of 2 hours. This freed up advisors to focus on higher-value activities, such as client communication and business development.
• Increased Advisor Productivity: The reduction in IPS generation time translated into a 20% increase in overall advisor productivity. Advisors were able to handle more clients, conduct more portfolio reviews, and spend more time on business development activities. The firm estimates that this increase in productivity has the potential to generate an additional $50,000 in revenue per advisor per year.
• Improved Client Experience: The automated IPS generation solution also improved the client experience. Clients received their IPS documents faster and more efficiently. The standardized language and formatting of the IPS documents also enhanced the firm's professional image. Additionally, advisors had more time to spend communicating with clients and addressing their specific needs. Client satisfaction scores, measured through post-onboarding surveys, increased by 15% following the implementation.
• Reduced Compliance Risks: The built-in compliance checks within the IPS templates helped to reduce the risk of non-compliance. The system automatically alerted advisors to any potential compliance issues, ensuring that each IPS met regulatory requirements and firm policies. This reduced the firm's exposure to potential fines and legal fees.
• Cost Savings: The automation of IPS generation resulted in significant cost savings for the firm. The reduction in advisor time spent on IPS creation freed up resources that could be allocated to other areas of the business. The firm also saved money on printing and mailing costs, as the IPS documents could be delivered electronically. The estimated cost savings for the firm is $25,000 annually.
• Scalability: The automated solution enabled Pacific Gate Capital to scale their business more efficiently. The firm was able to onboard new clients faster and more easily, without overwhelming their advisors. This positioned the firm for continued growth.

Key Takeaways

1. Prioritize Integration: Seamless integration between your IPS generation tool, CRM, and financial planning software is critical for automating data flow and maximizing efficiency. Look for solutions with open APIs and strong integration capabilities.
2. Invest in Customizable Templates: Ensure your IPS templates are fully customizable to reflect your firm's brand, investment philosophy, and compliance requirements. Consider creating multiple template variations to accommodate different client profiles and investment goals.
3. Automate Risk Assessment: Integrate your risk assessment questionnaire directly into the IPS generation process. This will ensure accurate and personalized asset allocation recommendations based on each client's individual risk tolerance and capacity.
4. Implement Compliance Checks: Incorporate built-in compliance checks into your IPS templates to reduce the risk of non-compliance and ensure adherence to regulatory requirements. Automate alerts for potential compliance issues.
5. Monitor and Optimize: Regularly monitor the performance of your automated IPS generation process and collect feedback from advisors. Make adjustments to the templates, workflows, and integrations as needed to ensure ongoing efficiency and effectiveness.

About Golden Door Asset

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