The biggest investor onboarding challenges

5 minutes
November 10, 2022

Investor onboarding refers to the process by which alternative investment firms (AIFs) bring new investor clients onto their platform to build and maintain long-term relationships. This process is the investor’s first impression of the firm’s operations and lays the foundation for a productive long-term relationship. 

Successful relationships, in turn, are fostered through transparency and trust. 

An AIF may have the most compelling investment strategy and priorities that align with the investor’s goals, but without a relationship that inspires trust, investors will not commit and readily take their capital elsewhere. 

One of the most effective ways to build trust is to make the onboarding process as streamlined and frictionless as possible, with platforms such as Scaling Fund’s Investor Relations Portal. Despite significant moves towards digitization of the entire industry, the onboarding process followed by AIFs is still largely manual, cumbersome, and can drag on for months, causing delays in closing and the actual capital collection. 

There is always the possibility of investors pulling out as they become frustrated with the seemingly never-ending back-and-forth interactions with the firms over minutiae. The ultimate aim of any customer-centric and growth-oriented AIF should be to optimise the onboarding process, to have a system in place that allows for quick and easy communication, and finally, to facilitate the transfer of capital. This is where Scaling Funds can really add value. 

What is the investor onboarding process?

The traditional investor onboarding process starts after the official agreement between the fund manager and the investor. It involves the submission of a series of forms and documents by the investor that are normally delivered on paper and require many signatures and verifications to ensure that everything is in compliance. Typically, it involves:

  • Frequent back and forth interactions over documentation requirements
  • Lots of paperwork for both the investor and fund manager
  • Prolonged verification process with multiple counter-parties 
  • Repetitive requests for and submissions of substantially similar documents
  • Multiple verification and authentication requirements to ensure compliance with various regulatory authorities including Anti-Money Laundering (AML) and Know Your Customer (KYC) checks
  • Repeated follow-ups 

Discover how ScalingFunds has automated and centralised that entire process


So why is investor onboarding so difficult?

The challenges for efficient and seamless investors’ onboarding are manifold: 

  1. Complex documentation: Subscription documents that have to be read and filled out are often extremely lengthy and full of legal terminology. Moreover, they will also vary across countries, products, and legal structures of the entities involved (e.g. trust, charity, corporation, etc.). The fulfilment of these documents takes time and resources and even then, according to feedback from Central Administrators, only about 25 to 35% of Subscription documents are successfully completed in the first instance.

  1. Incomplete data: Gathering the necessary data to complete the required documentation is a time-consuming and mostly manual activity, as is the process of entering it into investor data systems. There is a large possibility of errors and omissions, which in turn can lead to operational and compliance risks.

  1. Manual signature collection: Most onboarding processes require manual signatures on documents, often from multiple signatories, causing further delays. 

  1. Lack of transparent communication systems: Fund managers are not able to monitor investors' progress in completing the documentation without manual follow-up, and investors may not even be aware of any mistakes made in the process. 

In short, the majority of the process is manual, slow, labour-intensive, with a high chance of compliance errors and client dissatisfaction. This can have major consequences in the form of increased turnover of investors, who abandon the process before it is completed and missed investment opportunities and profits. In addition to that, incomplete or erroneous investor KYC AML files could attract fines and penalties from regulators as well as internal risk escalations. 


What actions can be taken to improve investor onboarding?

The recent pandemic limited face-to-face meetings and spurred innovative ways to reach clients, with technology playing a major role in facilitating interactions. Notwithstanding the debate on whether virtual meetings are better than traditional in-person ones, there is no doubt that the investor onboarding process alone can benefit immensely from automation and large-scale digitization. 

While customer relationship management (CRM) platforms for investors have existed for years, their functionalities are mostly limited to transaction facilitation and lack the technology to meet the evolving needs of investor-fund manager relationship networks.
A CRM that supports investor relations must necessarily address the pressure points in the traditional onboarding process. It should:

  • Simplify the onboarding process for investors, offering clarity around data and documentation requirements, machine-readable information collection, and integrating data validation.
  • Communicate not only information requirements but also progress updates for every stage of the process. Transparent communication facilitates information exchange which also helps manage expectations, particularly around lead times, thereby reducing the probability of the investor dropping out midway. 

To this end, a great Investor Relations CRM must include technical functionalities such as:

  • Optical Character Recognition (OCR) to facilitate data collection and input
  • E-signatures to hasten approvals
  • Online ID verification
  • Dashboards to track progress and guide users through each step before moving on to the next

ScalingFunds’ Investor Relations Professional was specifically developed to meet the challenges of the onboarding process by providing a single digital communication channel that integrates fund managers, investors,  transfer agents, and placement agents. Recent  results suggest that our platform onboards investors 4 to 6 times faster through a simplified process and enhanced visibility over communication between investors and the other parties involved in the process.


A tiresome onboarding process can reflect poorly on an AIF’s operational integrity and overall efficiency. In turn, a streamlined and expedited process can signal a fund’s appreciation for the investor’s commitment by providing them with a seamless and pleasant experience. When choosing an Investor Relations CRM, consider those like our Investor Relations Professional that allows managers to automatically generate and deliver online subscriptions, enable secure logins and sign-offs for investors, facilitate data collection and entry, and provide a dashboard that monitors progress and maintains direct communication between investor, fund managers, and transfer agents. Automating the process through a customer-focused Investor Relations CRM, which prioritises communication and maintains transparency throughout the process, can help build trust with existing and new investors, releasing time for the fund manager to focus on the high-impact work that matters: actively investing and sustaining investor relationships that are critical to the company's future fundraising. 

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