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Aggregation technology is a tool, not a magic bullet

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Aggregation technology, software that allows a comprehensive overview of clients’ accounts held at multiple financial institutions, is becoming an increasingly useful tool for financial advisors, but it is important to understand that it isn’t a magic bullet.

According to a recent Aite Group survey, advisors who offer account aggregation to clients show higher revenue production than those who do not.

Average practice revenue production is 36% higher for advisors offering aggregation, according to the survey.

About four in ten advisors reported higher or much higher levels of held-away assets transferred to their firm, more cross-selling opportunities and a higher client interest in financial planning among clients using aggregation tools.

Additionally, 44% of respondent advisors said that they feel aggregation has a significant impact in converting prospects into clients.

“It’s not really a big bang technology,” says Aite senior analyst Bill Butterfield, who wrote the report that accompanied the survey.

“If an advisor implements it, they’re not necessarily going to see a huge jump in revenues right away,” he says. “It’s really a tool that lays the foundation for future engagement with the client.”

The survey also found that firms that had offered the technology to clients for four years or longer showed more revenue production than firms that had offered it more recently or not at all.

One key finding for advisors interested in encouraging client adoption: Don’t require them to share all their data in order to use the tool; make it optional.

Clients who could use the tool regardless of whether they gave all their information, signed up at a much higher rate, 83%, as compared with just 51% of clients who were required to share to engage.

“That’s saying, if you want to share it with the advisor, that’s great, but if you don’t, that’s great, too,” Butterfield says.

“You’re really letting clients decide on their own. Maybe some won’t share initially, but they may over time,” Butterfield says.

“It’s one of those technologies where the less you force the client to share information with the wealth management firm, the more likely they’ll be to use it,” he says.

That makes perfect sense to Marguerita Cheng, a CFP and the chief executive of Blue Ocean Global Wealth in Gaithersburg, Maryland.

“We need to understand that, for certain clients, when we start imposing things, it may not have the desired outcome that we want,” she says.

And Cheng doesn’t want clients focusing on the tools if they aren’t comfortable with them.

Yes, she needs complete information on her clients’ finances in order to provide meaningful comprehensive planning, and, sure, an aggregation tool can be great for her and clients. But the focus has to be on making clients understand how it can help them.

If Cheng can give more accurate, real-time information with the help of a tool, she can give clients better advice.

“When you explain it like that, they’re more likely to adopt,” but you always have to explain how it benefits them,” she says. “It can’t just be about me.”

This story is part of a 30-30 series on savvy ideas on modernizing your practice.

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