As a fund manager you want to find investors, and enhance their experience, on all levels and at every stage.
So let’s start at the beginning — you’ve won your investor over. Now comes nobody’s favorite part: the complex and often nettlesome process of onboarding and complying with numerous standards covering Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT).
While all financial institutions must comply with these regulations and standards, alternative assets such as private equity funds are especially scrutinized by a host of authorities — both in the US (Treasury, IRS, FinCEN, SEC, FBI) and in every other jurisdictional touchpoint, including the country of residence of your investor and those of any feeder companies. Add to that the increasing use by tax authorities of AML statutes — as well as reporting standards such as the Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standard (CRS) — and the degree of complexity and risk funds face becomes increasingly evident.
It’s fair to say that while AML/CFT compliance has always been important, it’s never been more critical, more stiffly enforced, or more universal. Regulatory actions can run the gamut from fines for insufficient documentation to frozen assets to jail time. Not every investor will be on the up and up. Dropping the ball is a risk no fund manager can take.
The investor experience is your business
The reality is that for your prospective limited partners, the process is often just as unpleasant — with documentation requests and forms that can be as extensive as they are onerous. You want to help guide your investors through that gateway without stumbling. You don’t want to scare them away, or lose them halfway through the process. Here are just a few of the speed bumps that could upset the apple cart at this delicate time:
- Confusion about the process
- Investor questions that don’t get answered promptly
- Trouble finding or uploading the right documents
- The investor feeling they are being asked to give too much information
- Difficulties logging on
- Language or cultural barriers
In addition to creating potential roadblocks to onboarding, every stage in the process adds to the time it takes for the investors’ funds to find their way to you.
This all points to a sometimes overlooked business principle: starting the investor experience on the right foot — by establishing a narrative of responsiveness, security and efficiency — can pay dividends over the long term. It’s a message that will add to their larger sense of confidence that their investment is being protected and that they are in the right hands: from the beginning to the completion of the onboarding process, and beyond.
This is especially crucial when you are tapping into some of the rich sources of international capital, which come with a commensurate degree of complexity and risk (not to mention, cultural and naming differences).
Here’s where a fund administrator like NES Financial can make all the difference. Not only can we help guide you (and your investors) through the onboarding/AML minefield, we can do so smoothly and quickly — helping you act on outliers and red flags, minimizing the stress on your limited partners, and maximizing the speed at which the LP’s funds reach you.
Onboarding compliance is the first box you have to check — not the last one
Compliance, like investor confidence, doesn’t end at onboarding. It actually begins there. The quality of interaction and personal communication between you and your LPs will continue to inform their confidence in your fund. Our model is flexible: we can either handle the process behind the scenes while you interact with your investors, or we can work directly with them. Either way, they will get the service they deserve, and your fund will get the protection it needs.
The quality of your ongoing AML monitoring and compliance will continue to be critical to regulators, who like to see well-documented procedures that are updated and rigorously followed. Especially as a fund grows in size, the SEC checks in regularly to verify compliance, sometimes requesting documents for review under tight timelines.
We have a highly effective AML workflow, much of which is automated for efficiency and accuracy, and which includes daily monitoring through the Thomson Reuters World-Check risk intelligence database.
And on the investor-facing front, we are presently creating a new tool that will help simplify and guide your limited partners through every stage of onboarding and compliance. With our Silicon Valley, technology-based roots, we are able to update and adapt to investor needs and regulator demands significantly faster than larger financial institutions. That nimbleness, flexibility and responsiveness are key assets that benefit not only our clients, but their investor base as well — a win-win for both GPs and LPs. It’s part of our culture of quality, transparency and continuous improvement.
Here’s what it all adds up to: faster onboarding time, greater investor satisfaction, and the ability for the fund to focus on what you do best — raising more capital, making great deals, and delighting your investors at every stage.
For more information about how our solutions could benefit your business, please contact us. We look forward to speaking with you!