The decade-long effort to make aggregation portals a viable and valuable business-building tool for advisers, broker/dealers and other financial intermediaries has reached a crossroads. Today, portals provide a single access point for intermediaries with fully electronic account aggregation, research services, select transaction capabilities and access to the websites of participating mutual fund companies. Yet this is only the beginning: The next generation of portals is on its way, and it promises to enhance how intermediaries run their businesses.
Portals have been especially beneficial for small and mid-size advisers and broker/dealers. These firms may lack the resources of the wirehouses, and portals can help level the playing field for them. They can benefit from the account access, research and business tools that portals provide. Portals are going to have to provide additional value-added services and tools to grow their share of this market.
Financial intermediaries are not the only ones whose needs will drive change in the portal space: Mutual fund companies can profit from the aggregated business data that portals can provide and also can use portals as an important marketing tool, helping them to reach advisers and, by extension, investors.
Below are seven upgrades that portals will need going forward if they are to differentiate themselves competitively:
Multiple products: Today, few investors keep all of their assets in a single class of products or in a single fund family, especially affluent investors, who are every adviser's target. Portals need to be able to accommodate multiple products, including hedge funds and other alternative investments, exchange-traded funds, managed accounts and mutual fund wrap products.
Customization: Advisers and broker/dealers want to be able to work with an interface that meets their business needs without engaging in a convoluted modification process. They also want to have access to useful features-such as alerts about activity in client accounts, daily confirmations and tax data-and to be able to select various settings for these features depending on client needs. The portal's interface and features need to be flexible and easily customized by each user.
Open architecture: Intermediaries may want to consider the flexibility of open portals. Portals need to employ technology that leverages the National Securities Clearing Corporation's open architecture and Fund/SPEED's interactive services. This creates portals that are easily accessible by intermediaries and fully integratable by fund complexes.
Compliance assistance: As regulators expand investor protections, financial intermediaries increasingly are being drawn into the compliance process. For example, the Securities and Exchange Commission's Rule 22c-2, under which fund companies identify rapid trading and possible market timing, requires shareholder data from intermediaries on the underlying sub-account positions within their omnibus accounts. Portals, properly designed, can help fund companies and intermediaries exchange the information they require to meet their compliance needs, in an efficient and cost-effective manner.
Sub-accounting services: Sub-accounting enables intermediaries to provide shareholder recordkeeping and streamlined transaction processing across numerous fund companies. By providing a comprehensive view of both sub-accounted positions and those that are held directly at the fund, portals can provide a complete picture of a client's portfolio, thereby enabling advisers to offer superior asset allocation and risk management guidance to their clients.
Enhanced transaction capabilities: Although portals generally allow advisers to execute certain transactions, capabilities are currently limited, and only a minority of intermediaries use these features regularly. Portals need to become "points of commerce," with processing capacity that enables advisers to transact on their client's portfolio in an efficient manner across asset managers.
Security: With identity theft a growing threat, the primary concern with any web-based financial services product is the security of investor data. 128-bit encryption and multi-factor authentication are the new minimum requirements for any portal.
Today, portals improve financial intermediaries' practice management by streamlining their daily inquiry and transaction functions, providing information on business and industry products and trends and giving them access to lead generators and other third-party services that can help them grow their businesses. This is only the start. The next generation of portals will offer significantly more robust capabilities and become the financial supermarkets first predicted at the dawn of the Internet era.
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