🇺🇸United States

Delayed onboarding and investment due to slow suitability and risk profiling

3 verified sources

Definition

Suitability assessments require firms to obtain extensive information from clients before providing advice or managing portfolios, and MiFID II expects this to be done before recommendations are made. When the process is document-heavy and manual, clients cannot be invested until all questions are answered and risk profiles approved, delaying fee‑generating asset deployment.

Key Findings

  • Financial Impact: For a typical advised client with £250k–£500k in assets and a 1% advisory fee, each month of delayed investment due to suitability onboarding issues represents £200–£400 in lost revenue; scaled across thousands of new clients annually, delays can cost hundreds of thousands to millions per year.
  • Frequency: Daily – impacts every new client and every existing client who must update their profile before receiving fresh advice
  • Root Cause: Cumbersome questionnaires, repeated requests for similar data, lack of digital channels to capture suitability information, and compliance rules that block recommendations until complete data is obtained, as required by regulators like the AFM and FCA.

Why This Matters

This pain point represents a significant opportunity for B2B solutions targeting Investment Advice.

Affected Stakeholders

Client onboarding teams, Financial advisors, Operations and KYC teams, Compliance officers

Deep Analysis (Premium)

Financial Impact

$200-$400 per client per month in lost advisory fees on £250k-£500k AUM • For each advised client with £250k–£500k at a 1% advisory fee, every month of delay in completing suitability and risk profiling defers approximately $250–$500 in revenue; across thousands of new clients or mandates per year, this compounds into hundreds of thousands to several million dollars in annual lost or delayed fee income, plus increased operational costs from manual rework and prolonged staff involvement.

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Current Workarounds

Manual document collection and Excel-based risk scoring • Teams rely on document-heavy, semi-manual workflows: long PDF/Word questionnaires emailed to clients, wet-signed or scanned forms, back-and-forth email/phone to chase missing answers, client data rekeyed into CRMs and portfolio systems via Excel trackers, and ad hoc checklists maintained by advisors, relationship managers, and compliance to evidence suitability before allowing trading.

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Methodology & Sources

Data collected via OSINT from regulatory filings, industry audits, and verified case studies.

Evidence Sources:

Related Business Risks

Unsuitable advice leading to client redress, reimbursements, and lost ongoing revenue

£34.2m redress and costs for suitability/poor advice failings at UK wealth firm Charles Stanley in 2014 (pre‑MiFID II), with similar multi‑million remediation programs repeatedly cited by the FCA in later portfolio reviews; US state regulators also report suitability-based restitution orders in the tens of millions annually across advisers

Missed cross-sell/upsell due to simplistic or static risk profiling

Internal benchmarking by large wealth managers cited in KPMG’s MiFID II suitability review shows revenue uplifts of 5–10% of advised assets when moving from basic to robust, data‑driven suitability processes; the pre‑improvement state therefore reflects equivalent revenue leakage.

Manual, duplicative suitability documentation driving compliance overhead

$100–$300 of advisor/compliance time per advice event in many European wealth firms (estimated from KPMG MiFID II survey benchmarks) and significant additional FTEs devoted to suitability file remediation during regulatory reviews, equating to millions per year for mid‑ to large‑size firms

Poor suitability documentation causing rework, file remediation, and rejected advice

Regulatory-mandated remediation reviews can cost multi-millions in project spend (consultants, overtime) for mid‑sized advisers; additionally, a typical advisory firm can see 5–15% of advice cases flagged for missing documentation in internal QA, requiring 1–2 extra hours of advisor/back‑office time per case.

Advisor capacity consumed by repetitive, low-value suitability tasks

If advisors spend 20–30% of their time on data collection and suitability admin for an average book generating $800k in annual revenue, this represents $160k–$240k equivalent productivity lost per advisor per year; across a 50‑advisor firm this is $8–$12m of potential capacity not monetised.

Fines and sanctions for inadequate suitability assessments and risk profiling

Suitability and mis‑selling enforcement actions frequently run into the tens of millions in fines and client redress for larger firms; even smaller advisers can face six‑ or seven‑figure penalties plus mandated remediation, as seen in repeated FCA and US state enforcement reports for unsuitable advice cases.

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