How Delio technology strengthens your investor due diligence processes
Arguably one of the most important parts of the regulatory process for private market investments is investor due diligence. In the past 12 months regulatory bodies such as the SEC and FCA have been vocal about their increased focus on ensuring that clients are only exposed to appropriate financial products and services. With this trend only likely to continue, a financial institution’s ability to demonstrate and document that investors have fully understood an investment opportunity will become increasingly important.
Any investment due diligence process needs to be robust enough to minimise risk for investors, without becoming overly cumbersome. This is particularly true for investments into alternative assets given their longer-term, illiquid nature and the fact that investors won’t be able to easily exit their commitment once capital has been deployed.
For many organisations, responding to investor due diligence requests has traditionally been heavily reliant on manual, human intervention. This isn’t a particularly efficient way of operating and leaves institutions at risk of human error should incorrect information or documents be shared with investors. In addition to this, it can also lead to a sub-standard investor experience, with staff absence and schedules potentially becoming ‘blockers’ to information being shared when investors need it.
Process automation is one of the ways that institutions can overcome these challenges. If implemented correctly, technology has the potential to deliver additional value for both firms and investors.
Manage all due diligence requests from one place
Keeping track of and actioning investor due diligence requests associated with deals can cause operational and regulatory headaches, especially when dealing with multiple investment opportunities and clients. Delio’s technology streamlines this process and enables these requests to be managed from one centralised digital hub.
Internal users can respond to requests and view threads of ongoing discussions directly from their platform, making it easier to keep track of investor queries and offering greater transparency across teams. Further information can be shared with investors as it becomes available, and documentation to support responses can be uploaded to provide investors with as complete a picture as possible. Each action is also tracked and time stamped to ensure that a robust and auditable log of investor activity is recorded automatically.
Centralised document management
Hosting all documents in one digital hub, with version history and configurable access restrictions, provides financial institutions with an extra level of control around how confidential deal information is shared with investors. Delio’s platform allows you to determine precisely when documents are released; for example, an investor may only access confidential legal information once an NDA has been signed.
Hosting this documentation digitally also means that a digital audit trail is created. From a regulatory perspective, this means that firms can quickly and effortlessly demonstrate when information has been updated, accessed and downloaded. Automated document synchronisation also means that information will always be up to date no matter where it’s accessed.
Empower investors to instigate the due diligence process
The Delio platform means it’s never been easier for investors to proactively commence the due diligence process on deals. Rather than having to make a call or request a meeting through their relationship manager in order to find out more about a deal, the platform enables them to send direct messages, follow up on previous requests, and attach supporting documentation in relation to their due diligence requests. They can also view a history of their requests on each deal.
Some institutions also use the platform to connect potential investors directly with the management teams or entrepreneurs behind a deal. This enables investors to understand the value of the opportunity straight from the people who are best placed to explain it to them, and also facilitates one of the less tangible aspects of investor due diligence – achieving buy-in to the team that will ultimately be responsible for generating a return on their investment.
Why act now?
Despite a more cautious outlook for private markets this year, industry experts are still predicting that the demand for alternative assets is likely to continue to grow in 2023. This is in line with Delio’s own research which found that 88% of wealth managers report that clients are actively seeking access to illiquid assets.
As firms scale their private markets operations, greater regulatory scrutiny is likely to follow. Therefore, it’s even more important for firms to have robust and transparent investor due diligence processes in place and that’s exactly what Delio’s private markets technology delivers.
