What could be a better present for your most compulsive clients than neatly printed statements showing every dime they have - not just the individual securities, mutual funds and managed accounts, but their 401(k) accounts, 529 plans and checking accounts as well?
This isn't a new, untested concept. Banks and third-party dot-coms unrolled account aggregation programs years ago for modest and wealthy customers, and fund companies have been investing in account aggregation in the past few years.
However, independent financial planners, often in the vanguard of new services, have remained lukewarm on account aggregation. There may have been good reasons for reticence, but technologies - and, more subtly, attitudes - have changed. Will aggregation fizzle, or will it become the next hot application? For the time being, planners report little interest in account aggregation, but they expect it will gain a strong foothold in the years ahead.
Fund companies, wirehouses, banks and financial supermarkets may be unwelcome latecomers to the planning business, but they have deep pockets and an appreciation for what technology can accomplish. Take Baltimore-based Legg Mason, which rolled out its Total Picture service about a year ago. From the client's perspective, all online accounts are on a single screen - even those not under Legg Mason's management.
"It could include 401(k) accounts, credit cards, banks accounts, even airline frequent flyer accounts - anything that's an online account," said Sylvia Toense, director of marketing communications.
Legg Mason obviously sees this service as a way to inspire loyalty, as it provides Total Picture free to its customers. However, the service is not really proprietary. It turned to uMonitor, of Germantown, Tenn., to create its private-label interface.
"We get the information from everywhere," said President and CEO Dinesh Sheth, "whether it's a local credit union or Citibank." Would the New York-based bank protest if it knew its data, even with the full permission of one of its customers, was being used to bolster the Web site service of a rival?
It's unlikely Citibank would even know, Toense said. "To them, it just looks like the customer has logged in himself."
Sheth would be happy to private-label uMonitor for any investment manager with a service he calls "valet access." In this service, an adviser and a client turn over account passwords to uMonitor, which brings the information to the adviser's Web site where both adviser and client can view it. The company even provides analytics.
"We can tell you how much Microsoft stock you own even if it's spread out in multiple accounts," Sheth said.
Prices can vary based on size, he added. However, an adviser with about 100 clients would pay uMonitor a one-time set-up and license fee of about $10,000, plus between $500 and $1,000 per month for management.
Yodlee of Redwood City, Calif., occupies the other end of the spectrum, not in terms of its technology, which is sophisticated, but in terms of its marketing. Yodlee targets the individual consumer, although it works in co-brand partnerships with major financial firms. In fact, it's bankrolled by, among others, Chase Capital Partners of New York, E*TRADE Group of San Francisco, GE Capital of Stamford, Conn., Merrill Lynch of New York and Morgan Stanley of New York.
However, users don't have to be a customer of a partner to sign up for Yodlee. Free to individuals, Yodlee has a simple Web registration that allows users to aggregate accounts from a virtually limitless list of financial institutions and credit card companies. It even sports a feature that allows consumers to share their aggregated statements with their planners. This is a static statement, however. If the clients aren't sharing all their passwords, the planner has to rely on the client to continually send snapshots.
So simple and comprehensive is Yodlee that it has won over at least one planner. Scott Dauenhauer, a financial planner in Irvine, Calif., said, "I use Yodlee for myself personally, and I think the service is great."
But it's just for himself. He hasn't had much interest from his clients. "There are things that our clients don't want us to know, whether we like it or not." Clients may not want even a "trusted adviser" to hold all passwords, let alone a faraway company. (However Yodlee claims that all customer passwords are encrypted and thus unavailable to sneaky staffers.)
Dauenhauer has no plans to private-label an aggregation service as long as clients, if they so choose, can register for a free Yodlee account. "Is it a cool concept? Absolutely! Will it make the difference for a client in choosing an adviser? Highly doubtful."
Sharon A.C. Kayfetz, a financial planner in San Ramon, Calif., is one of the most technology-savvy planners in the business and generally finds the tools "a great idea." However, she said she is leery of the concept on psychological grounds.
"Will our clients really turn over to us all their accounts and passwords, which are necessary for these tools to be as magical as they are supposed to be? Not all clients want to bare their souls' to us in every way," Kayfetz said. "Do not kid yourself, as so many planners do, that they control all their clients' assets."
Also skeptical is Nancy Langdon Jones, a financial planner in Upland, Calif. She visits individual 401(k) sites, for example, after getting password information from clients, but finds full aggregation scary.
"The presentations are exciting and cutting edge, but I think people today are more than fed up with lack of privacy," she said. "We'll probably just keep working the way we are, and gather information from the Web sites monthly or quarterly to update the client portfolio and recommend appropriate changes."
Also heartily sick of it all is Dan Moisand, a financial planner in Melbourne, Fla. Moisand said that for all of the hype surrounding account aggregation, it has failed to take off.
"This is maybe the coldest hot topic' around," he said. "Being able to get information on accounts would be nice. However, the need only arises now and then. There is simply no reason to produce a net worth statement every day. I surveyed my clients recently and none of them were interested."
Moisand thinks financial firms will ultimately lock down their data. "Merrill Lynch will want to scrape but not be scraped," he said. "So, I'm inclined to think that a lot of firms will make it harder for the aggregation software to get the info, probably under the flag of security concerns."
Marketing, Regulatory Issues
In addition to skepticism among planners, aggregation partners may face marketing and regulatory issues. In a February 2002 report, research firm Gmez of Waltham, Mass., found account aggregation activity "lackluster" and cited concerns about how aggregation services should be regulated.
Over a year ago, in fact, the Office of the Comptroller of the Currency issued a report noting that aggregation services could run afoul of Regulation E, which covers electronic fund transfers. Aggregators also have to watch out for secrecy and privacy regulations. Planners involving their clients in aggregation may want to make sure their clients' banks are up to speed on the implications.
Despite the obstacles, new ventures persevere, and a handful of financial planners firmly believe aggregation is the wave of the future. One leading developer is Advent, a San Francisco software company that has never let planner disgruntlement discourage it in the past. Its Advent Custodial Data (ACD) service is fundamentally an account aggregation system. Recently, Advent made an even stronger move into aggregation with its purchase of Kinexus, a New York company that provides comprehensive reports to wealthy investors.
Harold Evensky, a financial planner in Coral Gables, Fla., believes "account aggregation is going to be mandatory in the future." Not that there will be a law requiring it, Evensky said, but clients will absolutely insist on it.
The goal, Evensky said, is dynamic, accurate net worth. "Information access will be more universal," he said. Planners will be able to "see where everything is" and their clients will expect this of them, he said.
As a result, he is using ByAllAccounts of Woburn, Mass., an aggregation company he finds especially adviser-oriented. That's not surprising, since its president and CEO, L. Patrick Gardner, is a CFP who worked as a financial planner before founding the company.
ByAllAccount's service works within the adviser's Web site in a co-branding relationship. The vendor charges a licensing fee and ongoing management fees based on the number of applications or analytics an adviser wants.
"Our focus is to work with trusted advisers and preferred clients," Gardner said. "To do the holistic wealth management, you have to go to all sources and all formats."
While Evensky admits that none of his clients have requested account aggregation, he remains optimistic about its future. In fact, Evensky believes account aggregation is something all financial planners should be prepared to offer clients. "The potential [for account aggregation] is extraordinary. No, I've heard no one ask for it. But we're planners. We're not supposed to wait until someone asks."