The battle to win investors’ hearts, minds (and capital allocations) – onboarding is more important than you’d think!
Every $3 of current demand in the market is chasing just $1 of supply.” That’s Bain and Company’s assessment of the situation facing the 14,1601 managers presently seeking to raise a fund, in their Midyear Report 2023. Jeffrey Jaensubhakij CIO at the GIC, the large Singaporean Sovereign Wealth Fund, noted that many of the factors that had been ‘tailwinds’ for the growth of private equity had ‘come to an end’ whilst Preqin reports “LPs may not be rushing to commit to new vehicles right now” citing factors including negative cashflows and the rising cost of debt.
In this more challenging and competitive environment, managers are pulling out all the stops to attract investors. “Sweeteners” such as discounted management fees and co-investment opportunities to attract larger investors and the development of private wealth offerings to access a wider pool of capital are both trends that are gathering pace.
Investor Onboarding – an early opportunity to establish a positive relationship
Having made the initial decision to invest, offering investors a better experience is now more important than ever. Here, investor onboarding (the process by which investors prove they’re eligible to invest, above board from an AML perspective and prepared to pay their taxes) presents an early opportunity to get relations with investors off on the right foot.
Frequently, due to a reliance on processes and systems that are no longer fit for purpose, it’s done poorly and so is low hanging fruit; easy to improve upon with significant benefits across the lifecycle of a fund. Whilst it might not be the killer hook to draw investors into a fund, it has the potential to make the difference between winning or losing an investor, or a decision to re-invest or not in a competitive environment where investors may be seeking to rationalise fund manager relationships.
A panellist at a recent event noted “the onboarding process won’t help you to close the deal…but a poor experience means you could lose that investor… and that’s not a conversation you want to be having with the CEO.”
Enhancing investor experience and driving operational efficiencies
We are seeing a push from fund managers of all sizes looking to establish a more efficient and investor friendly onboarding process.
Their key objectives tend to coalesce around offering a better experience through:
- Reducing touchpoints to investors with a single approval; and
- One portal for all onboarding processes, where investors can own and control their profile.
- A white glove experience with 24-hour human support.
Whilst driving operating efficiencies through:
- Access to enhanced investor data, for ongoing compliance and tax reporting purposes; and
- Greater privacy and security for investor data to facilitate with GDPR compliance.
On the other side of the table, we’re also seeing investors looking to streamline their KYC processes with respect to their own investment activities. So, overall, it seems to be the case that investors are no longer ‘resigned’ to a poor KYC and onboarding experience. As another panellist at the same event mentioned earlier said: “A smooth onboarding process is key to keeping investors and keeping them happy.”
Benefits of a one-and-done approach
Fundraising is more competitive, regulatory compliance tougher and good staff in higher demand. Ultimately everyone benefits from spending less time on repetitive, non-fee generating activities. With an efficient, centralised onboarding process that is entirely possible. Bring investors into your fund the right way and it’s pain free for them whilst gathering the complete data set you need for the lifetime of that fund and future funds so the process only needs to be completed once.
At IDR we’re facilitating this with a central onboarding clearinghouse and a universally compliant single access token to the private markets for investors. More than 40,000 investors across 5600 funds and 300 managers are already working with us. Why not join them?
