In a recent poll of our LinkedIn followers, 53% of respondents said the lack of a standardised approach to onboarding is the single biggest barrier to delivering a good investor experience in the democratisation of the private markets. Manual processes and resources to help investors came second and third respectively. Demonstrating some of the problems with the onboarding process in its current format, and why it needs to change as the private markets continue to open up to a much wider group of investors.
We explore how standardising the onboarding process helps to facilitate increased participation in the asset class.
What does a standardised investor onboarding process look like?
Onboarding refers to the process investors into the private markets must undertake before being approved to invest. It covers Fund Subscription, Accreditation, KYC, and Tax.
Investors are typically asked to provide this information for every fund into which they invest, in a variety of digital or even paper-based formats, and on different platforms. As an approach, this is unnecessarily time consuming and can lead to frustration because the questions they’re answering, and the supporting evidence they’re having to provide multiple times, is largely the same.
A standardised onboarding process, by contrast, approves investors once to a universally accepted standard. This allows them access to the wider world of private markets through completing the onboarding process only once.
Why is this important?
As the private markets are democratising, fund managers are raising bigger funds from a wider pool of investors. Improving and upscaling the investor onboarding process is therefore mission-critical.
An efficient and investor-friendly onboarding process is an essential component of a more accessible private markets ecosystem. Approving investors to universally accepted standard once helps achieve this.
How is IDR doing this?
We ask a lot of the questions that anybody who has ever completed the private markets onboarding process been asked time and time again. We ask for the same authentication documents and evidence. We screen through the same screening channels as anybody else, but we do it all once, within one platform, to the highest global standards.
This allows investors, once they are signed off, to share that profile across the rest of the private funds industry via a central hub.
Does this work when investors are investing across multiple jurisdictions?
A single approval can be used across all principal investment jurisdictions because we approve investors to the highest common international standards.
What are the benefits of a standardised approach?
For investors, the primary benefit of standardising the onboarding process is the ability to use their authenticated profile across all their investments.
It also drives much needed efficiency for fund managers because fundraising from a pre-approved investor base significantly reduces the cost and complexity of the onboarding process.
A recent survey from law firm, Dechert noted that 90% of fund managers think the “retailisation” of private equity will, to a varying degree, have a negative impact on returns. An efficient onboarding process, which brings down the costs associated with fundraising, could help to mitigate this.
But what about offering a white glove experience?
Standardising the onboarding process doesn’t mean fund managers can’t offer a white glove experience to their investors. Nor does it mean all investors will be asked to provide the same information.
Our approach ensures investors only need to provide the information that is relevant to them. A pension fund from the US, would be guided through a different set of KYC questions than a European individual investor or a Sovereign wealth fund in the UAE for example. What they would share, is live support throughout the process from an expert team to assist with any queries they may have, from technical to legal questions.
Ultimately the onboarding process isn’t where investors are looking for differentiation. They’re choosing funds based on strategy, performance, their own risk criteria and so on. A standardised onboarding process will however allow investors easier access to the private markets, whilst giving fund managers the confidence that their investors are approved to the required standards in a timely and efficient manner.
