Here's a product that leverages off-the-shelf software to jump-start account aggregation.
It is a privilege for me to continue in the footsteps of Joel P. Bruckenstein and contribute to MorningstarAdvisor.com's Technology section. I hope to build on the success of this column by providing actionable insight with ways advisors can use technology to improve their practice and deliver superior client service. And of course, your feedback is welcome so that I can identify what you like (and what you don't) and to center future columns around technology relevant to the way you operate your business.
With the introduction out of the way, let's move on!
All About Account Aggregation
Financial advisors add value to client relationships by providing clients with a comprehensive view of their wealth. This view not only includes investment accounts under the advisor's management, but also clients' employer-sponsored 401(k) plans, 529 college savings plans, and permanent insurance policies "held-away" at other financial institutions.
Many advisory firms use account-aggregation tools to reduce the amount of data manually entered into portfolio accounting software. Account-aggregation tools capture security price, balance, and transaction information for held-away accounts described above that cannot be moved to the advisor's preferred custodian. The aggregated data is then imported into portfolio accounting software, which significantly lessens the need to enter data by hand using month-end account statements obtained from clients.
When it comes to reconciliation-ready account aggregation, advisors have two main vendors from which to choose: ByAllAccounts and Advisor Exchange. Some might argue that products from Yodlee and AllData Advisor, a service from CashEdge, should be included among the choices, but in my opinion the data provided by these services is not suitable for reconciliation into popular portfolio accounting software.
Data aggregated by CashEdge and Yodlee is adequate for a daily snapshot of an account's holdings, but most of the data requires modification (often referred to as normalization) before it can be imported into programs such as Schwab Performance Technologies PortfolioCenter or Morningstar Principia CAMS and used for historical performance reports.
A Novel Approach
During a hallway conversation at an advisor conference last year, I met Hemant Moré, CEO of San Carlos, Calif.-based Arcons Technology. Moré told me about one of his company's passPort products in a discussion about account aggregation. PassPort uses a novel approach to aggregation by leveraging the functionality of Intuit's Quicken personal finance software.
Quicken Premier (MSRP $89.99) is a desktop personal finance application that includes tools to manage personal investment portfolios. Quicken users can create accounts to track investment activity in brokerage, IRA, 401(k), and 529 plan accounts in addition to their regular checking, savings, and credit card accounts.