Account aggregation came on the scene 10 years ago with much promise for the financial services industry. Simply having each client enter their online credentials for all their investment accounts into a central platform would provide firms with instant access into their client’s entire financial profile. What a huge advantage advisors would have over their competition if they could see how those competing brokers and advisors managed their client’s money. The benefits of having that on demand access are greater today than ever before, but at the same time we also have a much clearer picture of what it actually takes to successfully launch an account aggregation solution at the firm level….
We now know that it’s not as simple as enter a username and password and watch the account data update each night. Account aggregation takes time to setup and it takes time to manage. And because it takes real time on the part of advisors and their staff to get an account aggregation solution in place, and the benefits that come from this successfully deployed solution may not be fully understood by firms, account aggregation hasn’t taken off like it probably should. All you need to do is read the newly published 2009 Software and Technology Survey to understand just how much of an afterthought aggregation is for advisors and their firms. Only 72 words out of the 5,693 word article were devoted to the topic of aggregation. A collective “ouch” could be heard from aggregation vendors. Joel Bruckenstein, the author of the article and someone whose opinion I respect, surmises that the lack of interest could be due to “unrealistic expectations on the part of some advisors, as well as intermittent service gaffes on the part of providers.”
When I pick up my telephone I expect to hear a dial tone. The same cannot be said for account aggregation. It is not a “dial tone” ready service. Account aggregation is not perfect. But account aggregation is much more efficient than waiting until month’s end for your client to send you statements. And if you rely on this data to generate client reports, then it is night and day compared to the current method of having to manually enter every single position and transaction one by one into a 3rd party application. So with that, let me cover some of the most common pitfalls you can expect to encounter when working with account aggregation.
What to expect during setup
I can say with absolute certainty that you will have more than one client find that they are unable to aggregate an account or two during setup. The reasons will vary, but some of the more common examples are:
- Entering incorrect credentials in the aggregation dashboard
- Enter login credentials for the wrong financial institution listed in the aggregation dashboard — Fidelity has more than 25 different portals to aggregate from – If you have a 401k do you aggregate from NetBenefits or 401k.com?
- The financial institution displays security questions during the login process, but the aggregator has not accounted for this new level of authentication
- The financial institution requires the user to select from random images during the login process. Most aggregators will not be able to account for this, and therefore cannot aggregate the data
Common issues after the account is setup
- The dreaded 2-day old data – Aggregators harvest data at set times throughout the night. Let’s assume the aggregator harvests data from ABC Financial at 11:30pm on Wednesday night, but ABC Financial doesn’t update that user’s online account at the ABC Financial website until 1:00am on Thursday. Well, the data that is harvested at 11:30pm on Wednesday is Tuesday’s data. When you and your clients login to the aggregation dashboard on Thursday, you are looking at account information from Tuesday – hence the term 2-day old data. (It should be noted that the aggregator can, in most cases, push back harvesting time to account for this. But it requires you to let the aggregator know when the Financial Institution updates their site).
- Aggregators that screen scrape the data from websites rely on that data to be displayed in an HTML webpage. Data displayed inside images, AJAX, JSON, etc., very often cannot be harvested.
- Changes in the financial institution website can cause failures. The aggregation technology simulates the user’s action after they login to find the webpages where account data is displayed. If the financial institution changes where or how they present that data, then the aggregation vendor will need to re-engineer the harvesting scripts.
- Password changes at the financial institution will result in harvesting failures since the aggregation harvesting engine will not be able to access the online account.
Common issues with data quality
Now your clients have their accounts setup, and they are able to deal with failures when they crop up. Everything is going to start really humming now, right? Not so fast. Even if the account is updating successfully, there is still the issue surrounding data quality. The data harvested by an account aggregation vendor is as good or as bad as the data available at the financial institution website. Do not expect anything more than what is available at the financial institution website, but you may end up with something less. This means you will have to review the data during the first few months until you are confident that the data being aggregated is accurate.
- Prices and balances that don’t match the financial institution website – One cause could be 2-day old data. Another cause may be the aggregator is missing a MMF or Cash balance.
- Positions and/or Transactions missing symbols and cusips – A very common problem, but most aggregators have a solution when this happens.
- Missing transactions – It is all but guaranteed that aggregators will miss some transactions on any given night. It is important to note that transactional data is historical, so aggregators will “catch up” a day or two later and eventually harvest the missed transactions. But if you are doing daily performance reporting, you may not always have the transactions to reconcile the data. There are going to be instances where you will have to go to the financial institution website and drill through a few pages to find out what the transaction is supposed to be.
So why should you consider purchasing an account aggregation solution for your firm? One word – efficiency. With account aggregation you get the data every day. And if you are relying on the data for performance reporting, then you are reconciling every day. You will have instances where you will have to manually adjust some data, but you will be much more efficient working with account aggregation, and you will have more time to focus on growing your business.
Is account aggregation for you? You have to weigh the costs against the fees you collect. Do you have an account that you charge a $20,000/year management fee? And does that client have assets at an outside firm which you don’t have direct access to? If it’s only a few accounts at the outside firms, then it might be more cost effective to enter the data manually and forego an account aggregation solution. You have to consider how much you bring in from your clients, how much time you spend manually gathering data and entering that data into third party platforms versus automating that process through account aggregation and reducing the time you spend manually entering data by upwards of 50% – 75%.
Whether your experience with account aggregation is good or bad is all about understanding the limitations of account aggregation going in. In the long run, the benefits of working with account aggregation are huge – they greatly outweigh any of the problems you will encounter during setup. But you have to understand it will take time to setup and you will have to work closely with the aggregation vendor to get the data as close to perfect as possible.
Working with an account aggregation vendor is a long term commitment – your business is going to be around for years to come.
