How to Onboard Investors to Your New Fund

As fund managers bringing investors to commitment, you need a robust investor onboarding process in place. This assures compliance with regulations, but it goes well beyond that: smooth onboarding for new investors ensures your reputation or brand is positive.

If you are actively onboarding investors, you need to evaluate specific areas of your process. And it’s really not that hard.

What is Onboarding?

Technically, investor onboarding is the process of creating a workflow that addresses all the legal requirements to bring a new investor into your fund.

However, stopping at only the legal requirements leaves a lot on the table. This is an experience your investor will go through. You do not want to simply meet the minimum requirements; you have the opportunity to exceed your investors’ expectations, build trust, and even infuse a little personality into your relationship.

You need to create an experience that acclimates investors to your communications platform, your technology, and your philosophy. You do this by creating a formula that is thought out in advance.

3 Steps to Improving Your Investor Onboarding Process

When we evaluate our process at Midland, which we do twice a year, we involve our sales, compliance, and client service teams. They are client-facing team members and often have suggestions that are forehead-slapping moments; they reveal legacy processes that can be abandoned now that we do things differently; they describe conversations that they have had with clients that let us know what needs clarification. Whenever possible, involve the people who are speaking to your investors in the process.

Step 1: Define Your Investor Onboarding Process

Your investor onboarding process has a workflow, whether intentional or not. So, the first step is to draw it out. Literally, draw it out on a piece of paper or a whiteboard (even if it’s a virtual whiteboard). Start with the phrase “investor is ready to sign” as your starting point. There is paperwork, there are signatures, there are follow-up processes, there are funds to move, and there is an end result. Write it all out.

This exercise alone is money.

When we did this at Midland, we found small changes that we could make that prevented things from going from department A to B and then back to A again. While these were minor delays, they were unnecessary and had the potential to cause friction in what should be a smooth process.

When you see your process drawn out with all the steps that happen along the way, you will see who is responsible for what very clearly and it will prepare you for the next two steps in reviewing your onboarding process.

Step 2: Define Where Your Batons Get Handed Off

If you’ve ever seen a relay race, you know that a runner is going as fast as possible and needs to hand a baton to another runner who is also running. There is an incredible amount of rigorous training that focuses on just this one aspect of the relay race: the handoff. Why is that? Because a dropped baton is disastrous.

Pull out that workflow that you drew. Take a new color and mark big lines when the process leaves one person (if you are a small shop) or department (if you are larger) and goes to another. Often, where communication to investors will break down is when the process leaves one department in your organization and moves to another.

Ask yourself these questions:

• Does the workflow leave person A or department A, go to B, and then return to A? That is an opportunity for improvement. Can you re-order things so person/department A does what they need to do all at once so they only hand the baton off once?
• What is the alert or trigger to let person/department B know their part of the process is ready? Even if you are working from emails, something as simple as an email rule that marks it as “urgent” can set that apart from the other 100 items in an inbox. You have to create a signal that alerts the team that there is action needed to be taken.
• Clearly define the activities each person or department is responsible for and how long it should take. Tell your teams how long you want it to take, even if you are just giving them something to aim for. Whether they hit the deadline or not, at least there is an expectation set. This goes to the old saying, “You can’t manage it if you don’t measure it.”

Runners in a relay race rarely drop the baton while running down the track. Confusion in a workflow is likely to happen at the handoff, so define those points and give them the extra attention they need.

Step 3: Identify What Is Mandatory and What Is Secondary

In life and in investor onboarding, the priority you give something makes all the difference. The trick is to give the important items more attention than the unimportant ones.

If you have items that are absolutely necessary to get an investment processed, you identify those as mandatory. You can choose a sassier word if you’d like: First Level, Priority 1, Must-Haves. That leaves a bunch of items that need to be taken care of as leftover items, and these also need a name: Second Level, Priority 13, Clean Up Aisle 9. These are items that should not hold up the process of bringing your investor on board (and depositing that check).

When we ran this process at Midland, we found that if a client did not put the zip code of their beneficiary in their application, it would sit on a list for someone to call before the account would be opened. Happily, we have people who make those calls efficiently, but we could still lose a day or two in the process because of this one “Second Level” bit of information that was not mandatory. So we changed this item to a lower priority which allowed the account to be opened; then we created a secondary follow-up process where the zip code could be captured.

So the trick is this: don’t let everything weigh the same. Use your diagram of what happens in each step of the process and define what is mandatory to get your investors on board. Everyone involved (your team and your investors) will appreciate knowing these rules. Just don’t forget to create a path to catch the rest of the information in a second-level process.

Insight Into Nasdaq’s Onboarding Process

Recently, an article featured Lauren Wajda, Director of IR Intelligence, about Nasdaq’s focus on onboarding.

“Nasdaq has a strong customer and client-centric focus. There are several solutions within IR Intelligence, from services to our platform, and oftentimes as a client, your Nasdaq Account team is made up of numerous touch-points. I worked with key stakeholders to identify areas of opportunity to ensure a consistent approach to onboarding new clients and providing a positive Day 1 experience. It’s truly integral in laying the groundwork for building strategic partnerships.”

When you evaluate your investor onboarding, can you say that it was a “positive Day 1 experience?”

Good Investor Onboarding Fosters Good Relationships

The beginning of your relationship with your investors sets the tone for a lot of things: their attitude toward you, their interest in sharing the opportunity with others, the chance they will invest with you again. Describe what you want them to receive, feel, and expect (in brutal detail) before you even bring your first investor on board. Provide a positive Day 1 experience, and you will have many more investors ready for their Day 1 with you.

If you want more resources, visit our Launch Onboard Support (LOS) page. It can help you scale.

Midland Trust prides itself on making Self-Direction easy.  Please feel free to contact one of our consultants to help you onboard your next fund or group of clients.  We have automated the entire new account process, including integrating our application with the fund's subscription or purchase documents. Call 239-839-1040 or set up an appointment today.

Midland Trust can execute your investment paperwork and transactions, bringing alternative investment expertise without the cost of hiring additional talent. As a qualified custodian, Midland Trust can be engaged to help Advisors comply with the Custody Rule and offer document safekeeping services as well. Learn more here.

Author: Kelsey Dineen, Sales Director at Midland IRA, Inc.