Aggregation
What Is Aggregation and How Does It Work?
In the futures markets, aggregation is the process of combining all futures holdings held or managed by a single trader or a group of traders into a single aggregate position. Aggregation, on the other hand, is a time-saving accounting method for consolidating an individual's financial data from various institutions in the context of financial planning.
When serving customers' accounts, advisers are increasingly using aggregation since it allows them to discuss the accounts with the client in a clearer, more understandable manner before breaking the account down into its many categories.
TAKEAWAYS IMPORTANT
Financial advisers and banks compile information on their clients so that they may quickly get a clear picture of their finances. It also provides the client with an extra layer of security.
When customers refuse to grant them full access, advisors and planners say that they are unable to provide proper financial advice because they do not have a complete picture of their clients' money.
Aggregation benefits both parties, however the financial adviser has the upper hand since they may or may not see a gap in a client's servicing where they may upsell a product or service.
The Process of Aggregation
Account aggregation technology is used by financial advisers to acquire position and transaction data from investors' retail accounts at various financial institutions. Investors and their advisers can use aggregators to get a consolidated picture of their whole financial condition, including daily updates.
Both managed and non-managed accounts are handled by financial planners. Assets under the advisor's control are held by the advisor's custodian in managed accounts. Through a direct link from the custodian, the planners use portfolio management and reporting tools to gather a client's data. It is critical for the planner to have all of the accounts since aggregating them without having the entire collection would give an erroneous picture of the client's financial situation.
Non-managed accounts also include assets that aren't handled by the adviser but are nevertheless vital to the client's financial strategy. 401(k) accounts, personal checking or savings accounts, pensions, and credit card accounts are all examples.
When the client does not supply log-in credentials, the advisor's worry with managed accounts is lack of accessibility. Without regular information on non-managed accounts, advisors cannot provide an all-encompassing approach to financial planning and asset management.
Account Aggregation's Importance
Account aggregation services address the problem by providing a straightforward way to acquire current account status and transaction information from most retail banks and brokerages. Because investors' privacy is safeguarded, it's not required to reveal their personal access details for each non-managed account.
Financial planners utilise aggregate account software to examine a client's total assets, liabilities, and net worth, as well as income and spending, and asset, liability, net worth, and transaction value changes. Before making investment decisions, the adviser evaluates the numerous risks in a client's portfolio.
Account Aggregation's Effects
Rather than using banks' consumer-facing websites, several aggregation providers provide direct data linkages between brokerage firms and financial institutions. Clients consent to aggregate services by supplying personal information to banking institutions.
