Scudder Kemper Investments of Boston is testing software that can aggregate an individual's financial data from both Scudder and non-Scudder sources on a single spreadsheet.
Once an individual supplies his password for the Scudder aggregated account to the holders of his various financial statements - including checking accounts, mortgages, loans, mutual funds, 401(k)'s and individual retirement accounts - the software accumulates data from these sources so as to provide daily updates of their value. Scudder does not have access to this information.
The software, known as "aggregation technology," also allows an investor to manually supply illiquid holdings, such as real estate or art collections, so the value of those holdings can be included in the overall portfolio. The software also analyzes the aggregated information and advises an individual on preparing for retirement.
Most of the 25 Scudder employees who have been using the software since May have said it does a good job of giving them a complete picture of their net worth and what they need to do to reach their retirement goals, said Terrance McDermott, director of e-business development for U.S. retail at Scudder Kemper. Others said navigation was difficult, he said. None of the test users expressed concerns over privacy, he said.
Scudder hopes to introduce the software to shareholders by the end of the year or by early 2001. It had been trying to develop such software since it overhauled its website two years ago, McDermott said. ByAllAccounts, an Internet software start-up company in Woburn, Mass., is providing Scudder with the portfolio aggregation software.
The technology is in its early stages of development, McDermott said. So far, it is only being used by a handful of web portals such as Motley Fool - not by fund companies, McDermott said. However, McDermott expects the technology will begin to be more widely used within the next few months and will be seen as an important new method for fund companies to solidify customer relationships.
"This will be the most talked about innovation in financial services before the end of the year and is more than likely to become the next big thing," McDermott said.
Stephen Miyao, a senior vice president with kasina E-business Strategy Solutions of New York, a mutual fund electronic commerce consulting company, said he had not heard of any established fund company other than Scudder testing such software. X.com, a one-year-old financial services start-up in Palo Alto, Calif., announced at its launch that it would offer consolidated statements, as well as other services complementary to mutual funds. (MFMN 9/13/99)
Other fund companies besides Scudder will soon offer portfolio aggregation and analysis software "because the big portals and supermarkets are going to offer it," Miyao said.
"You want to offer value-added services to encourage your shareholders to come to your site," he said.
Celent Communications, a research company in Cambridge, Mass., issued a report earlier this year predicting high growth in aggregation software. Only 100,000 people made use of aggregation software of all kinds earlier this year but that will grow to seven million by 2003, according to Celent
Last week, Citigroup of New York launched a website dedicated to account aggregation, www.myciti.com. Yodlee of Redwood Shores, Calif. is providing Citigroup with the underlying aggregation technology.
Now that Scudder's test has shown that shareholders are likely to embrace the new technology, McDermott's group will work with three Scudder Kemper divisions to determine the best method of presenting the new service to their customers, McDermott said.
These divisions include Scudder Direct and the AARP Investment Program from Scudder, Scudder's joint venture with AARP for people over 50-years-old. Both of these divisions market Scudder funds directly to retail customers. Kemper Investments, which distributes funds through intermediaries, could also make use of the new technology, McDermott said.
Scudder Kemper will also continue to work on the graphics of the consolidated portfolio screen, McDermott said. It will probably increase the font size since many of the firm's customers are older people, he said. Scudder is also working with ByAllAccounts to add links to calculators and other investment information at Scudder's website, www.scudder.com, McDermott said.
"Internet connectivity will change everything" for fund companies and their customers," said Patrick Gardner, president and chief executive officer of ByAllAccounts. "There's a continuing shift among investors towards independent decision-making," and aggregation software enables a fund company to remain a part of that process, Gardner said.
ByAllAccounts hopes to sell its news software to a wide range of financial service companies, Gardner said. Scudder is the first mutual fund company to show interest, he said.