Aggregation in the futures markets is the process of combining all futures positions owned or controlled by a single trader or group of traders into one aggregate position. In a financial planning sense, aggregation serves as a time-saving accounting method that consolidates an individual’s financial data from various institutions.
Aggregation has become increasingly popular among advisors when servicing clients’ accounts, allowing them to discuss accounts in a streamlined and comprehensible way before breaking them down into their respective categories.
Key Takeaways
- Financial advisors and banks aggregate customer information to effortlessly produce a clear picture of the client’s finances, while also adding an extra layer of protection.
- Advisors often face hurdles when clients do not provide full access, hindering their ability to offer comprehensive advice.
- Aggregation offers benefits to both parties, with advisors gaining an edge that enables the identification of service gaps for potential upselling opportunities.
How Aggregation Works
Financial advisors use account-aggregation technology to gather position and transaction information from investors’ retail accounts held at various financial institutions. Aggregators furnish investors and their advisors with a centralized view of the investor’s complete financial situation, including daily updates.
Financial planners handle both managed and non-managed accounts. Managed accounts comprise assets overseen by the advisor and held by the advisor’s custodian. Planners use portfolio management and reporting software to capture client data through a direct link from the custodian, offering a clearer and more accurate financial picture.
Non-managed accounts, although not directly managed by the advisor, still play a crucial role in the client’s financial plan. Examples include 401(k) accounts, personal checking or savings accounts, pensions, and credit cards.
Advisors face challenges with managed accounts when clients withhold login information, restricting the advisor’s capacity to provide a comprehensive financial strategy and asset management approach without daily updates on non-managed accounts.
The Importance of Account Aggregation
Account aggregation services address the accessibility issue by providing a seamless method for obtaining current position and transaction information from accounts held across most retail banks or brokerages. Investors’ privacy is protected, eliminating the need to disclose personal login details for each non-managed account.
Financial planners utilize aggregate account software to analyze a client’s total assets, liabilities, net worth, income, expenses, and trends in asset values. Advisors also assess various portfolio risks before making investment decisions.
The Positive Impact of Account Aggregation
Many aggregation services establish direct data connections between brokerage firms and financial institutions, bypassing consumer-facing bank websites. Clients consent by providing their personal information for these aggregate services, facilitating smoother data collection and analysis.
Related Terms: account aggregation, financial planning, portfolio management.
