Onboarding
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The process of getting a client in the door and set up. Depending on what your client wants to do once she has made it aboard, this generally has a number of stages — in the argot, milestones, such as:
- KYC: all customers have to experience the rubber glove of AML procedures
- Client categorisation: A team will have to decide you are professional clients and send out the relevant terms of business and disclosures;
- Credit - those who are trading swaps, stock loans, PB — these days pretty much anything, other than spot and cash products — will need to be reviewed by credit, who will demand the imposition of absurd and intrusive credit terms which must be crowbarred into the master trading agreement by those sainted fellows in the ...
- Negotiation team: also known as the Sysypheans, they are doomed to labour until eternity making the fantastical aspirations of the credit officer legal flesh and blood.
Design thinking
For all the millions that firms spend on rearchitecting their onboarding systems — the philosopher-kings of operations who have transcended the intractable messiness of the service line will wheel out a strategic remediation initiative, every 18 months or so, but somehow nothing ever changes — a few foundational questions seem resistant to even being asked. Such as:
What is the point of onboarding?
It not only resembles a production line but is one. You are manufacturing a product for delivery to your client. But your revenue profile is different: you don’t make your money upfront, but only once the client has its product. You are selling a relationship, not a chattel. This means:
- Cut out the waste: You want the onboarding process to be as quick, efficient, pleasant and commoditised as possible. Here the Toyota Production System that spawned lean manufacturing techniques is a hearty analogue, and we commend our seven wastes of negotiation article. But note efficiency — in Ohno-sensei’s lexicon, muda waste, not cost, is the watchword. If you save cost but introduce inefficiency — ~cough~ outsourcing — then you are getting it wrong. Most people are getting it wrong.
- Build for the Future: Your optimal outcome and your client’s is the same: years of trouble-free motoring. Over the years your relationship will grow and the environment in which you do business will change in utterly unfathomable ways. You cannot anticipate these developments, but you can plan for them: design your relationship documents to be standard as possible, as simple as possible, as uncomplicated as possible, and as flexible as possible.
- Design in interoperability: Design for the positive development of your relationship in directions you didn’t expect. Make your documents as adaptable as possible. Your client may open business and wish to move to Europe. It may start trading FX and move to equities. Have a platform that allows a client to quickly add services, or switch.
- Make structural change easy: Design in a facility to bulk-amend to cope for inevitable regulatory changes. MiFID 3, ahoy!
- Don’t obsess over the disaster scenarios. Build basic protections against the failure of the relationship or your counterparty — failure to pay, insolvency —but beyond that, remember this is a relationship, and intraday risk is best managed by relationship management: margin, credit lines, client communication — to avoid cataclysmic meltdown, rather than by having an arsenal of weapons available to you should that meltdown come about. Think Chernobyl: by the time the core explodes, it’s kind of too late.