When Success Became a Problem
A broker-dealer was experiencing strong growth in alternative investment offerings, with advisors successfully presenting opportunities and securing initial client commitments. However, a troubling pattern emerged over several months: A material number of committed subscriptions were failing after investors had already made their investment decisions.
The issue wasn’t with investor interest or financial capability. Instead, subscriptions were declining due to compliance verification problems that surfaced weeks after the initial commitment. The firm was using multiple third-party services to handle different aspects of KYC and AML verification, creating a fragmented process where information could fall through the cracks. Beneficial ownership documentation collected often revealed incomplete or problematic information that should have been identified.
These post-commitment failures created a cascade of problems. Advisors began losing confidence in the subscription process as many of their successful presentations might ultimately fail due to compliance issues they couldn’t predict or control. The unpredictability made advisors hesitant to present opportunities, directly impacting the firm’s growth trajectory. Meanwhile, the operations team found themselves constantly managing crisis situations, attempting to remediate compliance issues after investors had already committed capital and expectations had been set.
The Search for a Solution
The firm’s leadership recognized that their current approach was fundamentally flawed. The fragmented system of third-party verification services was creating gaps in the compliance process, and the timing of these verifications was causing disruptions to the investor experience. They sought a solution that would integrate compliance verification directly into the subscription workflow, ensuring that any issues would be identified and resolved before commitments were made rather than after.
After evaluating several options, the firm selected 1776ing’s platform and it’s integrated compliance feature. Unlike other solutions that addressed individual aspects of the compliance process, 1776ing offered a comprehensive system that embedded KYC/AML verification, beneficial ownership documentation, and regulatory background checks directly within the subscription workflow. The platform promised to transform compliance from a post-commitment verification process into an integral part of the initial subscription experience.
Implementation and Integration
Implementation began with a detailed analysis of the firm’s existing subscription process. Rather than requiring a complete system overhaul, 1776ing’s platform integrated with the firm’s current processes, enhancing them with automated compliance capabilities. The most significant change was moving beneficial ownership document collection from a post-commitment activity to a proactive part of the investor experience.
New built workflows checked investor information against regulatory databases like OFAC with just one click. Necessary documentation was collected and validated instantly, with the system providing clear guidance to investors about any additional information needed before their subscription could be completed. This eliminated the possibility of discovering compliance issues after commitments had been made.
“Training the operations team on the new integrated procedures was a simplified process relative to past experiences”, said a senior due diligence team member of the broker-dealer. The team quickly adapted to the streamlined workflow, which provided real-time visibility into verification status and automatically generated comprehensive paper trails. The system eliminated the manual coordination required between multiple third-party services, simplifying operations while increasing the effectiveness of compliance verification.
Immediate and Lasting Results
The impact of the integrated compliance system was immediate and dramatic. Every investor who completed the subscription process had already satisfied all compliance requirements, eliminating the uncertainty that had disrupted the firm’s operations.
This transformation in subscription reliability had an immediate effect on advisor behavior. Advisors regained confidence in presenting alternative investment opportunities, knowing that successful subscriptions would remain so. The predictable process allowed advisors to set accurate expectations with clients about investment timelines and requirements, significantly improving the overall client experience.
From an operational perspective, the change was significant. The operations team was no longer spending time managing post-subscription compliance issues. Instead, they could focus on proactive support and value-added activities. The comprehensive archiving capabilities created by the integrated system also strengthened the firm’s regulatory compliance posture, providing documentation that meets regulatory requirements.
Long-Term Impact
Six months after implementation, the integrated compliance system had fundamentally changed how the firm approached alternative investment offerings and the operations team had evolved from crisis management to strategic support, helping advisors and clients navigate the investment process efficiently.
The elimination of post-subscription declines also had unexpected benefits for client relationships. Investors appreciated the transparent, upfront approach to compliance requirements, which built trust and confidence in the firm’s professionalism. The streamlined process became a competitive advantage, differentiating the firm’s service quality in an otherwise saturated and undifferentiated market.
This case demonstrates how integrated compliance infrastructure can transform operational challenges into competitive advantages, creating value for advisors, investors, and the firm itself through more efficient, reliable, and compliant processes.
Disclosures:
The content published on the 1776ing Blog is for informational and educational purposes only and should not be considered financial, legal, tax, or investment advice. The insights shared are intended to promote discussions within the alternative investment community and do not constitute an offer, solicitation, or recommendation to buy or sell any securities or investment products..
