Know Your Client Obligations | Boost your Business

‘Know Your Client’ obligations - Don’t just comply; make your business soar

The new ‘Know Your Client’ obligations mean more rigorous documentation and data management standards for your financial services practice.

But Knowing Your Client is only half the story. To make better, more informed decisions, you also need to Know Your Business

How can you easily get to know your client AND your business? Here’s how putting the right technology in place can help...

Set your business up for success

Do you ‘Know Your Clients’ as well as you’ll need to under the upcoming regulations?

Earlier in 2019, the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry announced several industry changes. These changes all aim to put the client’s best interests at the heart of every action a financial adviser takes. 

To prove you’re acting in your clients’ best interests as an adviser, you’ll need to document every interaction. That means the amount of data you’ll now need to store is increasing dramatically. The good news is that this opens up an opportunity to improve your technology and processes to not only meet the regulations, but also improve your business at the same time. 

Smart financial advisers aren’t just aiming to meet their ‘Know Your Client’ obligations. They’re also implementing changes that help them analyse their businesses and make better, more informed decisions. 

Will your business be one of the smart ones? Let’s look in more detail at what it means to Know Your Client and Know Your Business – and why you should do both

What does ‘Know Your Client’ mean?

Know Your Client is a term used throughout the banking and finance industry. However, it can be confusing, since the term can mean two different things:

  1. In banking, the law requires institutions to know the individuals or companies they’re dealing with. This means checking the identity of a customer to make sure that person is who they say they are and that their business actually exists. The aim is to help to prevent money laundering or terrorist funding.
  2. For those who give financial advice or sell financial products, the term refers to the process of getting to know your client. The aim is to be able to prove that you’re giving them appropriate advice that’s tailored to their circumstances.

The recent Royal Commission report led to the Financial Adviser Standards and Ethics Authority (FASEA) introducing a Code of Ethics. The Code, which is enforceable by law, contains twelve standards that aim to improve the quality of advice that financial advisers give. 

One of the obligations within the Code is that you get to know your client well enough to give them advice that’s customised to their needs, rather than generic.

The Know Your Client rule also means you need to keep complete, accurate records of all the advice and services you’ve provided for all clients. This includes former clients. 

To comply with these standards, you’ll need to capture more information from each client, then store it all in a System of Record. To prove that you really ‘know your client’, you’ll need to record everything from their life and family circumstances, to their financial goals and level of risk aversion.

Unless you have the right technology, that means you’re facing more paperwork for each client than ever before. And setting up your systems to help you Know Your Business (KYB) will automatically help you to Know Your Client (KYC) too.

KYB: Know Your Business

‘Knowing Your Business’ is the practice of analysing your business’s data to help you make informed decisions.

As a financial advisory business, you already produce a lot of data. At a minimum, you probably have client forms, records of client interactions, emails, client records, documents and voice recordings. The new ‘Know Your Client’ obligations now just add to that total. 

So if you don’t have all your data digitised and connected in a central system, you’re probably wasting a lot of time searching for information when you need it.

And storing data in hard copy where it’s hard to access isn’t just inefficient. It’s also short-sighted. Only once your data is stored properly, and digitally, can you use it to get to know your business better.

Know your business to thrive

The Royal Commission’s Know Your Client regulations require some financial advisers to re-evaluate their entire business. Not only have their obligations changed, but so have their revenue streams as the grandfathered commissions they relied on disappear.

If that’s true for you, you’ll have to figure out a new path forward. 

You’ll need to ask yourself questions like:

  • What will your business look like now?
  • How will you make money?
  • How will you provide value to your clients that’s worth paying for?
  • How will you know you’ve given your clients everything they need?
  • How can you increase the amount each client spends?

Without ‘Knowing Your Business’, you can’t see the potential opportunities easily. With accurate, detailed business analytics however, you can make smarter decisions about its future direction.

Unfortunately, while many advisers are fully across their financials, they fail to properly analyse their business data. They can pull their P&Ls easily, but not their business analytics. This means they don’t recognise trends in their revenue or their clients, which can lead to missing valuable opportunities.

Knowing Your Business means asking questions like:

  1. Which clients bring in the most revenue? Which clients bring in the least?
  2. Which departments of your business bring in the most money? Which bring in the least?
  3. How old are your clients? (If lots of them are over 60, you may have an issue in the near future.)
  4. Which clients have kids turning 18 shortly? How can you bring those kids in as clients?
  5. How many clients can each adviser in your practice handle?
  6. Which adviser brings in the most money?
  7. What would the impact be if you bought XYZ business? How many more advisers would you need to take on?
  8. How long does each part of the client process – such as onboarding, collecting digital signatures, gathering information, etc. – take? Can you save money by making some of it more efficient?

Being able to answer questions like these can turn your business from struggling to get by, to blowing away the competition.

How Knowing Your Business helps with ‘Know Your Client’ compliance

Many financial advisory firms are currently focusing on getting their existing data in order to meet the 1 January 2020 deadline for the Code of Ethics obligations. But if you just focus on getting your historical records in order without thinking about the future, you’re wasting a valuable opportunity.

Instead of just fixing things so that your past records are compliant, why not set everything up to ensure compliance going forward too? This is the perfect opportunity to not only meet your ‘Know Your Client’ obligations, but also streamline your processes and systems so you can Know Your Business and prosper. 

Baseline KYC Compliance

  • Meet baseline compliance obligations by knowing information about your clients
  • Go a step further and analyse your client data to better understand, for example who the ‘best’ clients are, and their demographics
  • Have a P&L and balance sheet

Power of KYB

  • Get clear on your business position, such as exactly where your revenue comes from
  • Make business decisions based on gut feelings
  • Make business decisions based on hard data

The business model for financial planners is drastically changing – for the better. But those changes mean you have to figure out how to stay relevant to your clients and provide a service that will justify your fees. Just because your business has been strong historically doesn’t mean it will continue to be in the future. 

Knowing Your Business gives you the data you need to decide how to do business going forward. It helps you to understand your costs vs revenue, what you need to do to generate that revenue, and how to give the best value to clients.

Plus, if you’re considering selling your business at some point, understanding it is an essential part of the process. You also need to be able to explain your analytics to potential buyers to give them a clear idea of the business’s value.

Regardless – whatever direction you want your practice to take, clear, easy-to-access information enables you to make better, data-based decisions instead of letting gut feeling rule you.

How Umlaut can help with both KYB and KYC

Despite the upcoming changes, some advisers STILL have boxes full of paper records. Are you one of them? 

Or perhaps you’ve digitised your files, but they’re stored on Dropbox or Google Drive (or worse, on someone’s hard drive!) Maybe you have a rudimentary filing system… or perhaps there’s no way of sorting records at all. 

These kinds of systems make pulling information painful and inefficient – as you’ve likely already experienced. They also make data analysis almost impossible, so your decision-making becomes a matter of guesswork rather than a data-based process.

And if your paper files are stored in archive boxes, or your digital records are spread across hard drives, proving compliance will be a nightmare. 

To stay competitive under the new changes, you need to centralise your data in a system like Xplan. This allows you to measure relevant metrics and generate meaningful reports, setting your business up for future success.

 “Financial planning has a great future, but it will be different. Those who take the challenge and opportunities that are there will thrive and so too will the profession.”

Dante De Gori, CEO of the Financial Planning Association

Umlaut’s experience in data management means we can help you find the easiest path towards both Knowing Your Client and Knowing Your Business.

Our recommended steps to help you become compliant (and more) are:

Step 1. Discovery Program

First step, undertake our Discovery Program. Through a series of consultations with you, our experienced data specialists map out a plan to meet your unique, business-specific needs.

We’ll also analyse your existing systems to find the compliance gaps, and recommend solutions to help you plug them.

Finally, we’ll then develop a plan with you, roll it out and train you to ensure the changes are as smooth and non-disruptive as possible. 

Step 2. Xplan Connect

Once we’ve identified where your old records are stored, our Xplan Connect service can help you digitise and import your data into your new system.  We’ll use our high-speed scanners to digitise your files, and flag any anomalies or gaps in your records.

Then, once we’ve digitised the information, we’ll store it in our secure, easy-to-retrieve digital file management system. This makes analysing your business data and proving you’re meeting your ‘Know Your Client’ obligations a piece of cake. 

At this point, many advisory firms will stop. After all, they’ve made their historical records compliant, so they figure ‘job done’. But it would be a waste of time and resources to make your historical records compliant, only to have to do it all over again in a few months.

So what you really need is a way to keep you compliant going forward. And taking the next steps to ensure that will elevate your business from the ordinary to the extraordinary. 

Step 3. AdvisorForms and Xplan Drive

Our AdvisorForms software lets you set up customised online forms that will automatically populate your System of Record, such as Xplan. This takes the time and hassle out of collecting and storing client data, and makes it easy for you to stay compliant. 

No more filling out paper forms and then manually entering the data into your system. No more posting forms out to clients and chasing them up to return them. It’s all done online, automatically, in a safe and secure portal.

Populating your System of Record is just one part of proving your compliance with the ‘Know Your Client’ regulations. You also need to be able to prove that the advice you’ve provided to each client is customised to their circumstances. Xplan Drive makes this simple.

Xplan Drive is a secure custom document management system that integrates with Xplan. It enables you to save documents, voice memos, meeting notes and anything else that relates to a client directly to their folder. And the process of retrieving the information when you need it is just as simple.

Together, AdvisorForms and Xplan Drive do more than just reduce your compliance worries. They also reduce your administration costs, helping your business to become more profitable.

Step 4.  Xeppo and UmlautBI

So now you’ve met all the ‘Know Your Client’ obligations. Your historical data is compliant, and you’ve set up the systems to maintain that compliance in future.

Now it’s time for ‘Know your Business’ to make its impact on your bottom line. Remember: the more you understand your business, the better your decision-making will be… and the further ahead of your competition you’ll be.

Together, Xeppo and UmlautBI can show you a consolidated view of your data, giving you new analytical insights into your business. It pulls together client data from across your business and presents it visually, all in one place. No more running around chasing information - now you can make more informed decisions more quickly, and with more certainty.

Solve your compliance issues now and into the future

Umlaut offers you the ultimate technology solution for compliance. We help you become ‘Know Your Client’ compliant now, and put the systems and processes in place to make sure you stay compliant.

Plus our data digitising and mapping solutions make it easy for you to Know Your Business, setting you on the path to thrive in the future.

Get in touch with us today 

XPlan Migration Guide

XPlan Migration Guide

In this FREE guide, we show you how to migrate all your data to XPlan in 8 simple steps.

  • Get compliance ready and protect yourself in case of audit.
  • Get your client data in a single easy to access location.
  • Easy to follow step-by-step guide.
  • Be able to self-audit so you know your business is safe.