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Is a client on track to meet their goals?

Is a client on track? This is a question that financial planners ask and get asked. How an advisor attempts to determine this is influenced by the data they have available.

One of the simplest comparisons is whether a client’s account values equal the plan projections. However, this is likely one of the least reliable methods since market returns are so volatile. On a one-year basis, they will almost never be equal to the assumption, often being much higher or lower. This could cause a client to react inappropriately. For example, if their net worth was higher than projected, they may spend excessively, with no way to make up for it when the market goes the other way, and their net worth is too low.

Another relatively easy comparison is account cash flows since most advisors use a portfolio accounting system. Here again it can potentially be very misleading. For example, if a client made their $7000 catch-up Roth IRA contributions, that may match the plan projections, but if the client used their equity line to do it, it may not indicate true savings.

So, what is an advisor to do? Obviously the most refined approach would be to compare each item on a plan - actual versus projected. That is the goal for many financial planners, with limited granularity for expenses for most clients, but transaction level accounting for all client cash flow accounts is a daunting task if done manually.

Traditionally to gather the necessary data, there are a lot of questions to the client with the typical quality of data ranging from "I think it was" to "I have no idea" (and unfortunately the quality is often not much better even if a client insists, they know). Advisors also ask clients for statements, but reliability and quality is often sporadic. This is frustrating to both the advisor and the client.

This is where account aggregation helps the financial planners cause. Account aggregation gives an advisor the holistic view into what's happening with all the client’s accounts, without having to ask clients. Today, most account aggregation solutions connect to more than ten thousand financial data sources each night, harvests balance, position, and transaction-level details, and provides this data to advisors online and in the form of file exports.

Your financial planning software likely offers aggregation fully integration or has integrations with standalone account aggregation providers like our company AllBackoffice. By leveraging the account aggregation integration with a financial planning software, financial planners spend less time manually collecting out-of-date information, and more time working on growing existing client relationships and cultivating client opportunities.

This is part one of a series of articles on how account aggregation can help financial planners and wealth managers improve operational efficiency. In part two, we will discuss the pros and cons of using a fully integration account aggregation solution offered by a financial planning company or working with an outside account aggregation solution that has more integration flexibility with various systems in a technology stack.

If you are an advisor or a technology provider and want to learn more about the AllBackoffice Account Aggregation solution, please call (919) 741-6104 or email us


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