Different Levels of Account Aggregation Services and Their Importance for Financial Advisors

One of the wonderful advantages of the internet is the capability of weaving data in sync from diverse sources into one place. In the background of financial advisors, this has led to the growth of account aggregation providers that pick-up data from different financial accounts and service providers.  

Earlier, the target was to obtain all the data and accumulate it in one place to give helpful reports – e.g., to estimate complete portfolio performance over many accounts and providers. With the growth of technology, it becomes clear that financial advisors can use account aggregation control panels and PFM portals to go further than offering a compact look at financial performance. Since the focus moves from just accumulating accounts to staggering advice and finally attaining automation.  

Levels of Account Aggregation  

There are rationally 6 stages of account aggregation, each giving differing and extra capabilities and more value-added prospects for financial advisors. The main point is that not all account aggregation providers are similar, and the abilities of what they perform– and what they can perform – differ broadly!   

So, this post shows the importance of account aggregation services with the six different levels.  

Level 1: Complete Investment Tracking  

The first level of account aggregation solutions involve drawing in the account balances of investment accounts.  

By pulling out all the household’s investment accounts into a single place, it is possible for the advisor to check what is held in each of their accounts and if any investments are required to be modified. Particularly, when the account aggregation providers pick up the account balance after each day, it might not be possible to check the investment performance results of all the accounts. Still, it is feasible to see them all in a single place and identify prospective investment problems where it may be essential to delve further.  

From the financial advisor’s perspective, Level 1 aggregation is prominent because it gives a chance to check assets that may be possible to administer or advise upon. Therefore, Level 1 account aggregation has a tendency to be prevalent for advisors and financial organizations along with adding value for customers to take the time to connect accounts.  

Level 2: Integrated Portfolio Performance Reporting  

Level 2 account aggregation is all related to pulling together transaction-level details across different accounts and providers. Generally, this data results in a more detailed portfolio performance and accounting software solutions. That, in turn, can then generate complete performance reports for the whole household on all those different accounts and investment service providers.  

The key distinctive feature of this level is its capability to deliver clean and properly conformed transaction-level data to properly create those integrated portfolio performance reports.  

From the financial advisor’s perspective, the integrity of this level is the ability to give complete investment performance reports for a whole household, particularly when investment accounts are retained across different providers or platforms. These solutions are extremely useful for investment-oriented advisors who either employ investments across many platforms or those that perform in the ultra-high-net-worth area. Also, consumer enactment tends to be more useful, as Level 2 account aggregation certainly provides views that the investors cannot simply obtain on their own or with Level 1.  

Level 3: Complete Net Worth Reporting  

At this level, account aggregation moves from only being about investment accounts and performance reporting. Also, changes to focusing on suggestions and easing more inclusive financial planning for the client’s overall household net worth.  

The key difference of Level 3 reporting is that it involves all of a household’s capital– not only investment accounts. This will include bank and savings accounts, specialized accounts such as health savings or college savings plans, and different asset types. Level 3 account aggregation must also involve a direct feed from the financial organizations that hold an individual’s obligations, including the present mortgage balance, credit card deficits, student and automobile loans, etc.  

From the financial advisor’s viewpoint, the applicability of Level 3 account aggregation differs based on the real focus of the financial advisor. Individuals who are mainly towards insurance and investment products would find this kind of account aggregation of fixed use. Furthermore, advisors related to financial planning get this level of account aggregation to be very useful because it can be a successful tool to supplement the depth and breadth of the financial planning discussions when offering a holistic suggestion.  

From the customer’s viewpoint, Level 3 account aggregation can be an ample value-add, giving a truly integrated household prospect of his or her financial net worth.  

Level 4: Tracking of Cash Flow  

This level is about the client’s P/L statement and accumulating all of the household’s incoming and outgoing cash.  

Particularly, the actual differentiator for Level 4 account aggregation is the ability to pick up the household’s cash inflow and outflow from different bank accounts, credit and debit cards, and the successful classification of those expenditures to make the data applicable and usable for the client and advisor.  

Successful classification of household expenditures has different unique challenges. These challenges are: easily finding out what an expenditure is to growing a proper higher-level budget categorization format and being able to differentiate between real household outflows and what are just intra-account relocations.  

In the context of customer, most households encounter to completely and successfully check their cash flow, and stumble even more to understand what proper expense levels must be and know even if they are truly living within their resources. Consequently, useful for classifying expenses, level 4 account aggregation offers a massive value-add for customers. Thus, letting expense-tracking-centric level 4 account aggregation have far more approval and involvement.  

Level 5: Constant Monitoring  

If the third and fourth levels are based on attracting all the data essential to make a household’s complete financial balance sheet and cash flow declaration to help with recommendation delivery, Level 5 is all related to doing something more with those details.  

Particularly, this aggregation is related to taking the details from assets, liabilities, and cash flow from the different data feeds and testing the data to mark possibilities for financial planning. And, these details will be then provided to the financial advisor as foreseeing alerts that can set off distance and communication to the customer.  

Level 6: Automatic Suggestion Execution  

Since level 5 account aggregation is intended to send alerts to financial advisors to approach clients for intense advice discussions, the final Level 6 is all related to automating the implementation of a pre-identified planning process. Also, it uses the data feeds linked to account aggregation to understand when to move the automatic trigger.  

Final Words  

Overall, it is easy to identify that the outlook for account aggregation providers is far more complicated than slightly obtaining investment data feeds from different broker-dealers and curators. Thus, different account aggregation levels are necessary for better results. Also, if you need more account aggregation details, browse through Anumati. 

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