When introduced about a decade ago, account aggregation was touted as a major adviser solution.
When introduced about a decade ago, account aggregation was touted as a major adviser solution.
The promise was that it would provide a holistic view of all a client's assets, no matter where they were held, and allow financial advisers to produce comprehensive financial plans.
Early versions were somewhat disappointing, and the typical $1,000-a-year cost of using the technology led many advisers to question its worth. But users of today's account aggregation tools are strong fans, and recommend the tool to other advisers.
“You'll earn [all the business] if you're any good,” said LeGrand Redfield, president of Asset Management Group Inc. in Stamford, Conn., which manages $130 million in assets.
Plante Moran Financial Advisors in Portage, Mich., has licensed Custodial Integrator from ByAllAccounts of Woburn, Mass., with Advent Portfolio Exchange. By doing so, the firm receives daily financial updates for 1,006 accounts that are spread among 155 organizations.
While declining to disclose how much the firm spent on account aggregation technology, associate Ann Massey estimated the firm's “return on investment is 80% to 90%,” considering the time saved by not having to accomplish the same tasks manually.
Plante Moran, which manages $5.3 billion in assets, couldn't return to manual data entry without “fundamentally changing the way we serve our clients,” she said.
At least one adviser thinks the technology allows him to provide better advice.
“Before we do the kind of detailed analysis we do, people come in here and tell us they don't think they can ever retire,” said Michael Black, a certified financial planner with Michael Phillips Black Wealth Management in Scottsdale, Ariz. “The public feels that they have lost control of their financial worlds, and by using aggregation and downloading data into their financial plans, our clients can see that they can control their worlds after all.”
Michael Phillips Black has been receiving account information from AllData for Financial Advisors from CashEdge Inc. of New York, and since March, it has populated the data on the Lawrenceville, N.J.-based Albridge Solutions Inc. portfolio-reporting system.
For the 50 accounts that have been migrated to CashEdge so far, the cost is $145 per month. Michael Phillips Black Wealth Management has $75 million in assets under management.
Early in her career, Rebecca Preston, sole proprietor of Preston Financial Planning in Providence, R.I., would enter her clients' positions in 403(b) and other accounts held in custody at TIAA-CREF, Fidelity Investments and other organizations.
“When I had 10 or 12 clients, doing that was OK. Now I just don't want to have to work that hard, and I'm better able to see how all the different accounts fit together,” Ms. Preston said.
Each morning, her firm's financial planning software, Money-GuidePro from PIEtech Inc. in Powhatan, Va., is populated with stocks, mutual funds, bonds and other assets that her 40 clients hold at other institutions.
“I don't know how I could handle it right now without account aggregation,” Ms. Preston said.
Her cost is about $1,200 a year for CashEdge and about a $1,000 for MoneyGuidePro.
With all its improvements over the early days, account aggregation software still isn't a technological utopia. A lack of consistency and uniformity in the data collected, for in-stance, can lead to operational quirks.
“Each custodian uses different verbiage — one may code a mutual fund sale as a “distribution” and another as a “redemption.” And a “purchase” can be a “buy,” said Vincent R. Barbera, a CFP with TGS Financial Advisors in Radnor, Pa., which manages $185 million in assets. “You have to spend a few days testing to make sure that all the different players are speaking the same information. Once it is done, though, it is beautiful.”
To avoid delays and problems, TGS Financial spent several days testing ByAllAccounts before implementing it six months ago. It costs the firm $2,000 annually for Custodial Integrator, plus a $70-per-account fee per year for the 200 clients using the system. In addition, there was a one-time $1,500 training fee.
Another hurdle is that financial advisers must get their clients' user names and passwords for all their accounts and enter them into the platform so the systems can collect the account data.
A few clients balk at that because of privacy concerns, but most embrace the technology once they understand how convenient it is, advisers said.
Each account aggregation platform collects data in its own way. The first and least reliable method is HTML harvesting, also known as “screen scraping,” where the aggregation company's software logs into a client's account using their login ID and password, and copies the financial data from web pages. While the screen scrape method gathers only basic portfolio data, it is probably adequate for advisers who create simple financial plans.
CashEdge's AllData relies more heavily on this method than other systems, according to Alois Pirker, a senior analyst with Aite Group LLC of Boston.
AllData relies on HTML harvesting to access 40% of its data sources and 20% each from file downloads and direct feeds. The remaining 20% comes from proprietary systems at financial institutions. The company receives data feeds from 11,000 organizations.
ByAllAccounts receives data from just 2,800 custodians, relying on file downloads for 70% of its access to them. Only 15% are collected through screen scraping and 5% through direct feeds. The rest use more than one method to collect data.
Advent Custodial Data from Advent Software Inc. of San Francisco relies on a direct feed for collecting data. While this means it can provide the most in-depth data, it is a proprietary system that requires advisers to make use of additional Advent software to process the data.
“Advent is definitely more expensive, but it is a different proposition because you get a lot more detailed data, like tax-lot-level data, that you can do most anything with, like re-balance [a portfolio] against it,” Mr. Pirker said. Advent has more than 400 links to custodians.
When deciding which service meets an adviser's needs most effectively, Mr. Pirker said, it boils down to a simple question: “You must ask yourself whether you are more of a financial planner or more of a holistic investment manager where you might really require the depth of a system like [Advent's] ACD.”
E-mail Davis D. Janowski at djanowski@investmentnews.com.
