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| > The Practice > Technology |
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| Account Aggregation Comes of Age |
| by
Joel P. Bruckenstein
| 02-09-05 |
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A few years ago, pundits were predicting that account aggregation was going to be the next “big thing” in the financial-services industry. It never happened. Until recently, account aggregators have had some success wooing the do-it-yourself set, but financial advisors and their clients have been slow to adapt the technology.
There are a number of reasons for the low adoption rates at advisory firms: a lack of demand from clients, the inability of advisors to recognize the benefits of account aggregation, a poor job by account aggregation firms of understanding the unique needs of advisory firms, technology that was “not quite there yet,” and the limited availability of broadband access to the Internet.
Now, however, things are starting to change. The technology is getting better, aggregation firms are beginning to understand that advisors have unique needs (tracking frequent flyer miles is not one of them), and advisors are starting to wake up to the potential benefits that account aggregation can offer.
In the current environment, with low expected returns for traditional asset classes, smart advisors are placing more emphasis on “holistic” planning and looking for opportunities to add additional value. By providing financial advisors with a more complete view of their clients’ financial situation, account aggregation can help further this goal.
If you buy the argument that account aggregation’s time may have come, the next question is: Where can you get it? Over the past several years, a number of firms have been vying for advisors' data-aggregation business, but the largest, and arguably the best known, of the data aggregators has yet to be heard from in the advisor marketplace in a meaningful way; until now, that is. Within months, I expect Yodlee’s AdvisorView platform to become widely available to independent advisors.
Len Mangiaracina, senior director and general manager of Yodlee’s Wealth Management division, created quite a stir at a data-aggregation panel I hosted last fall at the Financial Advisor Wealth Management Symposium. He announced that Yodlee would soon be offering free data-aggregation services to advisors.
At the time, the Yodlee plan was to offer its services directly to advisors, but Yodlee apparently has changed direction. Now, it is planning to offer its advisor product through intermediaries, but the result for many advisors may be the same: Yodlee anticipates that at least some of the intermediaries will make the Yodlee advisor account-aggregation platform available to their clients at no charge. Others will probably offer it at a very modest cost. Yodlee refuses to name names, but it lists Schwab and Fidelity among its clients and partners, so I would not be surprised if one of them were to announce the availability of Yodlee AdvisorView soon.
While the product for independent advisors is still in beta testing, I persuaded Yodlee to give me an early peek, with the understanding that the product was still a “work in progress,” so some of what I’m about to describe may change before the final release.
AdvisorView is a platform that essentially leverages Yodlee’s existing infrastructure. It is composed of two separate Web sites: the client site and the advisor site. At the advisor site, you can invite your client to set up a free account with Yodlee ClientView. The client receives an e-mail that contains a link to the ClientView site and a user name. A password is provided separately. Clients then register their accounts with the Yodlee site. Once their accounts are registered, they can permission you, their advisor, to view the accounts. For enterprise accounts, advisors have the option of pre-registering the institution’s accounts for the client. For example, if you work for XYZ Financial, and you set up an account for your client, all of that person’s accounts with XYZ will be pre-registered when the client activates his account for the first time. Yodlee can also pre-register all of an advisor's clients on the advisor Web site, so that the advisor will not have to add them manually.
At the client site, your clients can add all of their investment accounts, bank accounts, loans, credit-card accounts, insurance, etc. Adding accounts is easy. You simply select the type of account (banking, for example), scroll down to the name of your financial institution, supply your account information, and in less than a minute, the information is verified and the account is added to the Yodlee module. According to Mangiaracina, one of Yodlee’s advantages over the competition is the number of data sources it can access. “We can access data at about 6,000 financial institutions vs. roughly 2,000 for our competitors,” he says. (I looked to see if it linked to Power 1, a local credit union, and I was pleasantly surprised to discover that it did.)
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Joel P. Bruckenstein, publisher of T3: The Newsletter, is the industry's expert on applied technology for financial professionals. In addition to his monthly columns, Bruckenstein consults with companies large and small to help them achieve higher returns on their technology investment. For more information of Bruckenstein's consulting services, or to have him speak at your upcoming event, please visit www.joelbruckenstein.com.
The author is not an employee of Morningstar, Inc. The views expressed in this article are the author's. They do not necessarily reflect the views of Morningstar. |
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