NIGO is an acronym that stands for “not in good order.” In investments, insurance, or pretty much any other industry that requires paper documents to be filled out, a document is considered “not in good order” when it is submitted with missing or inaccurate information. This is a surprisingly common problem, especially when documents have entire sections that only apply to specific types of investors and are not applicable to others. Such errors then need to be corrected before the document can be processed.
There are two major problems caused by high rates of NIGO documents:
Because of the extra time and man-power required to correct errors, NIGO documents can cost a company 3-4 times as much to process as a document that is submitted correctly the first time.
This may not seem like much of a problem if your company is only dealing with a few documents submitted with errors, but in the case of the securities industry, an average of 30% of documents qualify as NIGO. Those costs can add up quickly.
While the cost of correcting NIGO documents is high, the cost of not correcting them is even higher. In some instances, investors will change their minds between the time they submit a document and the time your company gets in touch with them to correct errors. Some may even pull out of the investment because the process is so error-prone. This is because the back and forth required to correct the errors creates a negative user experience.
In online retail, poor user experience was linked to shopping cart abandonment rates of 68% in 2015. How many times have you added something to your cart online only to exit out of the site when they have too many ads popping up or ask you to sign up for a profile at checkout? Investors are no different - an investment process that is confusing or lengthy may deter investors and, depending on your investment minimums, could cost you tens of thousands of dollars.
How to Decrease NIGO Rates
Industry averages are just that: averages. Some companies are operating at much lower rates – as low as 2-5%.* What gives them the edge? Companies that utilize subscription automation technology enable their investors to only have to enter their information once, cutting down on discrepancies. Subscription documents are pre-populated, automatically placing information only in the applicable sections, before being emailed to investors for their electronic signature. This process is faster and less prone to errors, creating a better user experience. This can decrease costs and abandonment rates, saving you time and money.
*Based on internal research estimates
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Disclaimer: WealthForge provides this information for educational purposes only. It should not be construed or relied upon as legal or tax advice.