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What Is Account Aggregation?

What is it?

Account aggregation is exactly what the name implies.  It allows for individuals to see their entire financial picture on a single screen by compiling information from thousands of financial institutions.  As many people today have accounts across multiple institutions, this tool has become more and more popular.  It also helps with keeping accounts in order without the need to login to individual accounts and remembering lists of websites, passwords, user names, and security questions.  Eliminating the need to continually update everything into a spreadsheet or file folder, account aggregation is a powerful tool that can do all that work for you!

How does it work?

There are multiple account aggregation software options out in the market today.  These software companies have partnered with institutions around the world in order to come up with a product that provides all-in-one functionality for an individual.  At THOR, the account aggregation software tool we utilize offers our clients the ability to integrate accounts from over 20,000 different institutions.  Just like signing into your bank account online, you can link account aggregation software with the multiple  financial institutions with which you work .  Data from all the accounts you linked will be pulled onto your account aggregation screen, presenting all your financial information in one place.  Updates are provided in real time on a daily basis.

How is it helpful?

There are multiple ways account aggregation is beneficial.  The first is that it saves the client time and energy organizing their finances.  It allows a client to view their complete financial picture at any time and it is updated automatically.  The excel spreadsheet you put together monthly in which you spend a few hours logging into each account and updating your assets and liabilities is no longer needed.

Need a loan and the bank is requesting your balance sheet to see if you can get approved?  You can bring up your account and print the balance sheet provided without much work at all.

You want to know how much of a certain stock you own throughout all your brokerage accounts, 401(k)’s, and IRA’s?  Account aggregation lets you to find this information quickly as it will search through all your accounts to determine the portion of your portfolio allocated to any one stock.

What if you only own mutual funds and ETF’s?  The software also has the capability to search through the individual mutual funds and ETF’s you own and calculate what percentage of a stock you own within all of your funds.

Do you honestly know your diversification across your accounts in aggregate? Account aggregation enables you to see all your accounts offering multiple views of an individual’s complete investment picture between stocks, bonds, cash, and alternatives as well as liabilities.  If you want to dig even deeper, it allows you to single out just your equity positions and from there you can see the percentage of your portfolio by sector or industry.

Lastly, do you understand what your cash flow situation is and where all that hard earned money is going?  With account aggregation, it is easy to add your credit or debit cards to the software and it will sort out the transactions, tracking where you are spending your money on a monthly and annual basis.

Is it secure?

The best account aggregation software providers are dedicated to protecting their users and having top security standards in place.  They have much of the same security and compliance standards as global financial institutions.  All information that is gathered for linked accounts (bank accounts, brokerage accounts, credit cards) is not stored on the account aggregation provider’s database.   The information that is aggregated is securely transmitted in read-only format so there is no ability to modify account information, execute trades from your brokerage account, deposit checks into your savings account, or initiate transactions in anyway.

Written by

Jimmy Stechschulte, CFA®

As a member of the Investment Committee, he performs investment research on both equity and fixed income products to help construct diversified portfolios for clients. Jimmy also meets with and assists clients with financial and retirement planning needs, estate planning, and tax planning issues.

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