Aggregation Myths vs. Reality
Myth: Account Aggregation is just Screen Scraping
Reality: Screen scraping refers to the gathering of data from web pages, as seen in a web browser, and represents but one of many delivery mechanisms and data formats the ByAllAccounts system handles. Screen scraping is a small but important data gathering technique in our toolbox, as nearly 30% of the financial services from which we gather information only provide that information via web pages.
Myth: Data gathered via websites is inaccurate and unreliable
Reality: There is no correlation between format or the delivery of the data and accuracy or completeness. Often data available from a web site is widely scrutinized, and errors are identified and remedied more quickly than is the case with other delivery mechanisms. Inaccurate and incomplete data can be delivered by any source. ByAllAccounts assesses all available formats and mechanisms for the best overall data. Even when web pages are not used as the primary source of information, these pages may still be needed to complement the data obtained by other means. Institutions place a high premium on providing accurate data to their on-line users, and web site data is scrutinized carefully by the millions of investors viewing it daily. Errors are quickly identified and remedied. Ultimately, highly accurate data is available via web sites, through HTML and fixed formats, as it is via direct feeds, but both methodologies can also produce poor data quality. It is the rigor of the institution providing the data, and the sophistication of the aggregation technology that ultimately determines data accuracy, not the data format.
Myth: FFIEC guidelines requiring two-factor authentication will prevent aggregating data from websites.
Reality: FFIEC, a governing body for banks, thrifts, and credit unions, has previously announced guidelines that require institutions to provide additional security for sites that provide account information. Some fear that institutions might introduce solutions, such as hand-held password-generating tokens, that would thwart account aggregators. However, tokens are expensive to maintain, and institutions are moving towards solutions that are less invasive and ultimately invisible to the investor. ByAllAccounts and other services using online aggregation technology catering to the wealth management market have seen virtually no impact from the FFIEC regulations, and have taken proactive steps to insure that they remain insulated from potential adverse effects.
Myth: Custodians would rather provide their account data by direct feeds
Reality: A greater number of custodians are providing file downloads in specific formats for various portfolio accounting systems from their websites. They have found that direct feeds are costly to build and maintain.
Myth: Account aggregation technology is okay for retail investors, but is not ready for investment advisors.
Reality: In fact, the opposite is true. Account aggregation is having its greatest success with investment advisors. Advisors require accurate data that can be reconciled in their accounting system, and firms such as ByAllAccounts have created reasonably priced offerings targeting this need. On the retail side, where investors can be equally demanding in terms of data accuracy, but much less willing to pay for the service, a sustainable business model has not emerged, and there has been a general lack of adoption among retail investors.
Myth: My clients will never give me their passwords.
Reality: Account aggregation systems require on-line access to investment information. This information is typically guarded by a system of credentials, which require an account number and PIN or password to gain access. Investment advisors often already have the necessary access privileges, either because they have ‘institutional access’ (as an advisor to the account) or because the investor has already given them the credentials, so as to facilitate the advisor’s access to important information. If the advisor must ask for the credentials, one way to overcome potential objections is to use features that allow the investor to enter the credentials themselves, without every divulging the information to the advisor (but still permitting the account aggregation system to access the necessary data). On the whole, since there has never been a breach of security in the account aggregation industry, most objections can be overcome through education and communication between the advisor and the investor.
Myth: If I accept credentials, I will be deemed a custodian because of ‘constructive receipt’ of securities.
Reality: A very small number of advisors have raised the issue of constructive receipt. They fear that, because they have access to credentials that theoretically give them trading access, they could be deemed to be a custodian, and subject to unwanted requirements. To the best of our knowledge, no advisor has ever been put in this position, nor is it clear that the SEC regulations on ‘constructive receipt’ extend to this type of a situation. Nonetheless, it can be avoided in a number of ways, such as using only sites and credentials that do not permit trading access or, when this is not possible, requiring that the clients administer the credentials themselves.
