The Big Picture: Account Aggregation

As individual investors are increasingly being enticed to open accounts online with different brokers offering the lowest transaction fees or the incentive of the month, they are also becoming increasingly confused over how to manage these various accounts. Managing money held in one 401k account, another two or three mutual funds, as well as several brokerage accounts, throw in a few annuities held by an insurance broker, and it becomes more and more difficult for individuals to monitor their complete portfolio.

Several vendors are jumping on this new market niche, called account aggregation, that culls accounts whether through a broker, insurance company, mutual fund company or the like, and allows the individual to get a complete picture of his or her holdings. Vendors that are in this space include Vertical One, Yodlee, and Byallaccounts.com.

Patrick Gardner, president of Byallaccounts.com is sure that account aggregation is going to be the next big thing. And why shouldn't he? With Celent Communications predicting that by the year 2003 seven million individuals will use aggregation services, compared to the 100,000 that do so today, it certainly looks promising.

Byallaccounts.com, is a little different from Vertical One and Yodlee in that it offers analysis of the portfolio in addition to aggregation. The Boston-based company launched a Web-based portfolio management tool it calls WebPortfolio, which gathers account information from multiple financial services firms and aggregates the information on one Web site. As a result, the individual investor can view and analyze its whole portfolio—whether accounts are held with Vanguard or Schwab, or any other financial institution, says Gardner. He explains that with WebPortfolio, users can see their asset allocation, check their holdings's diversification and see the risk and return analysis.

Gardner, who formerly worked for Charles Schwab, and prior to that Wells Fargo and Vanguard, notes that the idea for such a tool "grew out of frustration of managing portfolios." He says currently the individual investor does not get a big picture view of his or her portfolio, but has to monitor it by individual fund or holding. Investors cannot effectively manage their accounts that way. Byallaccounts collects passwords and data from the individuals who are customers of their client, and aggregates the data using the customers' personal passwords. The host institution does not have access to a user's password. Gardner points out that this is extremely important as one of investors' main concerns is security: "individuals are adverse to the practice of cross-selling financial products." The service includes analytics that run on the portfolios displaying returns, current allocations, performance and risk levels.It will also provide an investor's total-net worth—giving the user the ability to add home values, art collections, etc. The site provides links to custodial vendors for trading, and, Gardner adds, in the future the service may include advice.