Standardised onboarding takes off in Asia

Asian brokers are beginning to follow global trends as they accelerate the streamlining and standardising of onboarding procedures when taking on new clients.

And as the pressure of new regulations and the need for industry efficiency mounts, the case for centralised, standardised platforms is becoming increasingly compelling to many brokers, a regional risk expert said.

Buyside clients including fund managers may previously have had to send individually tailored due diligence documentation to all the various brokers used for onboarding.

But service providers are now coming into the region to pitch to sell-side and buyside alike with the offer to use their centralised platforms. These platforms allow fund houses to upload a set of standardised documentation that could be shared amongst various brokers needing their Know Your Customer (KYC) paperwork, said Kristen Tiner, head of Asia-Pacific risk at Thomson Reuters Risk Business.

Part of the interest driving such initiatives is the call for greater standardisation in a bid to boost industry efficiency.

“Right now, if a fund manager trades with 12 brokers, all 12 of them will probably have a different onboarding policy and it’s going to require different documentation to be provided,” said Tiner.

But Tiner highlighted an investigation conducted by her firm of 11 major banks, which found that while 80% of them have the same onboarding policies, the remaining 20% were different.

“We then challenged [the 20% banks] and asked why they are asking for certain documents, and more often or not, their response was because they have always had the procedure, but in reality, there was no regulatory reason for the extra documentation,” Tiner said.

“For example, if I am BlackRock and I want to give my documents to Morgan Stanley or JP Morgan, why does each document need to be different?” she asked.

“The documents are probably not needed and if Morgan Stanley is asking for additional extra information that is just causing additional work and headache for me as a fund manager. If there is no reason for it, then let’s just standardise the procedure.”

Likewise, the industry is increasingly looking to adopt a standard platform because of more regulation. As new rules come through, such a platform would help inform buyside firms of the need for extra documentation, while the sell-side would get a continuous record of documentation to satisfy its KYC compliance needs.

This would be a sea-change from previous regimes, where brokers may have had to go through one-, three- or five-year review cycles for every asset manager on its books depending on the risk a particular buyside firm poses.