- The hottest trend going today in the financial services industry
is Account-Aggregation. The internet now makes it possible for
people to easily access all their updated financial information
in one spot at the click of a button. Here is why both CPAs
and their clients stand to benefit - and big time. For the CPA,
the development can be a key to finally becoming the key financial
advisor, the quarterback and kingpin.
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- What is account-aggregation
Account-Aggregation is a term referring to the process of consolidating
an individual’s various financial accounts, such as bank
accounts, investment accounts and insurance information, in one
spot, easily accessible to the individual and to his or her advisor.
This process has greatly increased in popularity within the
last year, with the proliferation of websites offering aggregation,
including major financial companies (Citibank’s MyCiti.com)
and large brokerage firms (Greentrak.com for high-end clients
of Merrill Lynch, Paine Webber, and myCFO.com) as well as financial
websites such as Yodlee.com and OnMoney.com who are tied in with
major portals. MyAccounts on America Online has the potential
of eventually bring aggregation to millions and making aggregation
an everyday word.
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- Benefits for the consumer
Simplicity, cost-savings and time savings, and they are significant.
Many people have several accounts at several different institutions,
and have to deal with the onslaught of paperwork monthly. Even
when they get up-to-date information online, they still only
get it for a select few accounts. Until aggregation, it had
been difficult for an individual to get a good handle on where
they stood at any given moment or what transactions have happened
which have an impact on current financial planning, especially
tax planning and investment planning. Here are some examples
of questions not easily answered without aggregation or consolidated
updated financial snapshots:
1. Have investment managers kept up with stock indexes and justified
their fees?
2. How much has been realized in capital gains, short-term and
long-term, and earned in interest and dividends, and are estimated
tax payments sufficient?
3. What are the unrealized losses in case it is worthwhile to
get the tax benefits by taking losses?
4. Should I pay the CPA $1,500 to prepare an updated balance
sheet for the estate planning attorney, or should I do my best
to guesstimate the figures?
5. How much have I been paying in investment management fees,
bank charges, commissions, etc.?
6. Are my investments still properly allocated on a consolidated
basis?
7. Am I paying too much for my insurance? Do I have enough?
Do I have too much?
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- Putting the information together was a time-consuming process
often dreaded by the individual as well as the interested advisor.
Faced with spending lots of time and money, many people found
a way to shortcut the process, often by overlooking precision
or just taking guesses or falling behind or sometimes totally
out of touch. Financial planners and advisors had to spend a
lot of time, and charge expensive fees to uncover the information
needed, and in many cases went only part of the way.
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- Now with aggregation, all that has changed. In the more
comprehensive aggregation case, a person can see all of the present
and all the past of their financial lives, consolidated and in
detail, and with various options to sort the data. Up to the
minute and accurate. In other cases, the process is not as comprehensive
or detailed. Updated balances are available but not history,
or sometimes history but not sortable for maximum benefit for
tax purposes. Some aggregation services are just for individuals
and others are available for businesses too.
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- Benefits for the CPA
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- An opening -
Scores of thousands of CPAs have been expanding their role with
clients with respect to financial planning and advisory services.
Many thousands are getting licensed by the American Institute
of CPAs as Personal Financial Specialists or by other organizations
as Certified Financial Planners or licensed as securities representatives
or insurance agents or accredited estate planners or some or
all of the above. Why such a movement? Clients are requesting
the CPA to be more involved, and clients for the most part trust
the CPA to give solid objective advice. After all, the CPA has
been the clients most trusted advisor, and by a wide margin,
in part due to the CPA’s expert skills at analyzing data
and imparting reasoned sound advice, but also because of the
CPA’s training and attitude about independence, objectivity,
ethics and client service. Too often the CPA has watched other
advisors such as planners and brokers reap huge financial rewards
for giving advice quite similar, and sometimes not as good as,
that given by the CPA on an informal basis. Now, CPAs, many
faced with declining revenues from other traditional services
like accounting and auditing, are in droves wanting to get in
the act, and become the key financial advisor to handle as many
facets of a clients financial affairs as possible, including
comprehensive financial planning and advisory services.
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- Account aggregation opens the door -
The CPA can use the process of account aggregation to begin,
perform, and monitor key financial services. If the CPA is just
beginning to be involved in personal financial services, the
process of gathering information is made much simpler, and less
expensive for the client, on both an initial basis and on a recurring
basis. And the CPA is doing work that the CPA and the client
are quite comfortable with, namely recordkeeping and analysis.
Furthermore, the computerization and online elements of the
process enable it to be time-efficient, allowing the CPA to spend
more time on more creative activities such as developing important
financial strategies which create extra money for the client
and help the client attain their goals. If the CPA is already
involved in financial services, the aggregation process can help
with time-efficiency and cost-savings for both the CPA and the
client, further improving the relationship.
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- Many financial service organizations, including banks and
brokerage firms, see account aggregation as a way for them to
have a better look at all the assets, including the ones they
do not have, in a quest to gather more assets. As a result,
they have been, and will continue to heavily promote account
aggregation, and it is expected that the trend will catch fire.
CPAs have a great opportunity to position themselves well for
this development between the providers of the service and the
end consumers as the best choice in helping along the process.
CPAs could help clients to decide which service best suits the
clients situation, and then work with the client in implementing
the service, and then monitoring it and fitting the use of the
service to maximize advantages for the clients. Importantly,
if the CPA wins the role as aggregator, the CPA becomes the center,
the quarterback and focal point through which the other financial
providers need to report. Through holistic positioning in this
role, CPAs will be better able to position themselves as the
advisors who understand the whole, not just the parts. And knowing
the present and seeing the future, not just reporting the past.
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- How CPAs can help
I believe that account-aggregation represents a very significant
opportunity for CPAs who get involved the right way and early.
CPAs remember that those CPAs who were out front and used the
development of electronic spreadsheets and computerized accounting
programs to benefit their clients also benefited themselves.
This development, I feel, could have even greater ramifications,
and I will be advising both the pubic and the CPA, not only in
writing but also via individual conferences and group conferences
to include leaders in the field of account aggregation.
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