The need for aggregated data and analytics have been the main influences for the digital transformation taking place in wealth management firms. But many technology providers still have limitations on the data they make available even in today’s crowded solution-heavy environment.
There just simply isn’t an easy way for advisors to access data let alone use it to generate insights and help manage their client’s accounts and the firm’s operations.
It used to be that advisors simply wanted to get a client’s regional bank account or old 401(k) into their client portal so that they could see everything you could advise on. But that kind of account aggregation has been around for nearly 20 years now. There’s so much more that account aggregation can be and do.
And it’s a necessity. Advisors need to be able to go beyond just seeing data to being able to understand and analyze it in order to deliver comprehensive advice with full knowledge.
So what is the current state of account aggregation for financial advisors? What advances are on the horizon? And how can advisors and your clients benefit? Let’s take a look.
What is Account Aggregation?
At its core, account aggregation means taking information from all of your data sources and pulling it into a turnkey solution to create a single source of truth that delivers a 360-degree view of a client.
But there can be many levels of account aggregation, which are summarized like this by industry commentator Michael Kitces:
- Level 1: At the first level, account aggregation really is just a basic pull of client account information for client investment accounts that are not directly managed by the advisor. You may be able to see an account balance, but you can’t see much in the way of performance. And your clients don’t gain much insight since they already have access to all of these accounts.
- Level 2: When you go a step further, you can see portfolio performance and transactions across multiple investment accounts and investment services providers. This allows the advisor to generate comprehensive reports that are more novel and helpful to the client in addition to being able to share more insights given the holistic view they now have.
- Level 3: This next level of account aggregation now includes all household assets (not just investments), including bank accounts, other savings like college savings plans or health savings accounts, any owned real estate or current mortgages, and even debt like credit card balances, student loans or car loans. By seeing all assets alongside liabilities, advisors can better track a client’s net worth and progress toward goals. For clients, they get an all-encompassing look at their financial health.
- Level 4: With the next step, account aggregation can get more granular and pull in clients’ cash flow to better track spending and savings trends. Having their spending categorized can help clients understand and manage their money habits so that they can reach the goals they’ve set with an advisor. The advisor can then use the data to easily track milestones and identify other investment opportunities.
- Level 5: At this level, things go a step further by turning up the monitoring of cash flow and automating it. Advisors can set up alerts so they know when there’s been either a big increase or decrease or something has hit a predetermined threshold and know that they need to reach out to clients for an update. Maybe they just got a pay bump or they had to dip into their savings because the water heater and roof both had to be replaced unexpectedly.
- Level 6: The final level brings automation to both the advisor and the client. For example, a client could set their account to automatically transfer money to an investment account if their checking account gets to a set amount, which the advisor helped determine.
Why Financial Professionals Need Account Aggregation
It may seem like everyone is offering some level of account aggregation today — from financial planning systems and portfolio management software to purpose-built personal finance platforms like ByAllAccounts or larger solutions like Plaid.
Because there are so many options, it can be hard to know exactly where to turn. It’s all about knowing what your unique needs as a financial advisory firm are when it comes to data and analysis. The top three reasons firms need account aggregation today are:
- A Single Source of Truth: You need to provide a turnkey way to gather data from disparate systems and create an enterprise-level source of truth that you can go to in order to elevate your strategic and operational decision-making.
- A Single Access Point: You need to provide advisors and clients with one place where they can see all of the data and accounts. With a true 360-degree view of their clients, advisors aren’t wasting time going from system to system or custodian to custodian to gather information. Plus, clients won’t have to hunt for all of their financial information to see their trends or progress.
- A Unified Experience: You need to provide a unified but also enhanced experience for your advisors and clients. By being able to see all of the assets and liabilities of clients, advisors can provide more holistic financial advice and produce dynamic reports to help clients understand their overall financial health.
How Data CaR from Skience Streamlines Account Aggregation
Not all solutions in the wealth management world offer top-level account aggregation that meets the needs of firms, your advisors, and your clients. Skience’s enhanced data consolidation and reconciliation (Data CaR) solution integrates with other fintech and downstream systems to create a single source of truth that propels digital transformation efforts and drives growth.
Skience’s account aggregation delivers an easy way to view a complete picture of a client’s assets from a single access point. Users aren’t forced to use static, outdated views for all financial data. Instead, the Skience platform offers contextual views of financial account data and removes the frustration of viewing blank fields that aren’t relevant.
And because firms need a streamlined way to meet compliance obligations while using several different data sources, Skience simplifies regulatory procedures, solves complex compliance challenges, and reduces regulatory scrutiny.
Whether utilizing Skience’s Data CaR or partnering with our Consulting team, wealth management firms can count on us to help them make data-driven decisions to better serve their investors, advisors, and employees.
Request a demo today to learn more.