Client Transition Risk Scorecard
Case Study
Issue
Investment manager had a loose process covering client intake and did not anticipate or identify more complex higher risk elements of a client intake transition. This problem was exacerbated when experienced staff rotated off the transition team and were replaced by less experienced junior staff. Two primary risks were present: The buried risk was that this gap laid risk at the initial stage of the client transition where the issues were dormant until a triggering event. The more overt risk was that this gap caused funding delays (lost revenue) for complex accounts which tended to be larger and more lucrative investment mandates.
Process & Approach
Assigned composite complexity score to each transition. Performed retrospective analysis to identify account features that presented the more complex and higher risk elements of a client intake transition; in-kind contributions, trading accounts for commingled funds, directed/minority brokerage, unique IMA contractual provisions. Assigned complexity ratings to each element within the transition to determine a composite complexity score for each transition. Revenue associated with each transition was determined.
Result
Complexity score/points were used as a tool, among others, to manage the client intake transition process.
- Team member assignments were made on the basis of a transition’s composite score/points to balance workload and assign more complex transition to seasoned staff.
- Transitions were risk ranked with complex higher score transitions assigned the highest level of risk to feed into the firm-wide risk management program for forecasts and key risk indicators.
- Funding of client transitions were prioritized and managed based on expected revenue in coordination with business development team.