From high-quality aggregated data to open banking support – How ByAllAccounts is taking wealth management to the next level

Despite data being the lifeblood of wealth management, many firms lack complete and clean datasets. Brian Costello – head of data strategy and governance at Morningstar Wealth – recently sat down with FinTech Global to explore how ByAllAccounts is helping wealth technology enterprises, platforms and the wealth managers they serve improve their use of data.

ByAllAccounts is a financial data aggregation and enrichment solution from the team at Morningstar Wealth, which is part of the wider Morningstar brand. ByAllAccounts originally founded over 23 years ago with the aim of empowering the investor and advisor journey. It was initially sold directly to registered investment advisors (RIAs) to help advisors fulfil their fiduciary responsibilities and offer comprehensive guidance to their clients. Its platform collates an extensive and highest-quality data sources that spans the whole investment spectrum and enhances it to ensure it meets the rigorous standards for advanced investment reporting applications.

Its work soon caught the eye of Morningstar and was acquired in 2014 for $28m. This deal helped accelerate ByAllAccounts’ development through access to proprietary investment data, prominent wealth management firms, and internal experts in the field. Since its acquisition, ByAllAccounts has continued to evolve its offering, with it now accurately mapping 3.7 million publicly traded securities across 15,000 financial institutions. Costello said, “Leveraging these resources, we drive innovation in our product and service offerings, addressing challenges related to secure permissioned data sharing that impact the wealth management industry.”

Over the past two decades, ByAllAccounts has overcome various market challenges, whether that is the 2008 financial crash or the COVID pandemic, but it has never faltered. As to how the company has experienced consistent, strong growth, Costello said, “The key to ByAllAccounts success is our laser focus on empowering wealth technology platforms and apps to provide advisors with the tools and data they need to deliver personalized advice and run efficient practices.”

During its evolution, ByAllAccounts pivoted away from selling directly to RIAs and towards partnering with WealthTech platforms, start-ups and enterprises, including broker-dealers. This shift was guided by the changing wealth management and investment advice ecosystem. The team has adapted so it can ensure all advisors and advice tools can get a full view of their respective clients’ assets, holdings, liabilities, and financial behaviors.

Standing out from the crowd

The WealthTech market has become a hotbed for innovation. In fact, the WealthTech market is projected to grow at a CAGR of 14.8% to be worth $18.6bn by 2030. As a result, companies are heavily competing for the attention of wealth management firms. ByAllAccounts has several factors that make it a leader among data aggregation providers.

Most important is its deep domain expertise within wealth management, which is highlighted by its data sourcing and enrichment capabilities. Its platform offers complete data sourcing for advisor and investor aggregation, powered by over 15,000 data sources, including cash, investment, cryptoassets, credit, loans, and mortgages. On top of this, it also boasts over 1,200 institutional site connections. Furthermore, the platform enables investor-permissioned financial data aggregation to let clients link and view their full financial picture and monitor their progress towards goals.

ByAllAccounts is clearly a unique solution, . but as to what makes them the best partner, Costello explained that ByAllAccounts is the only data aggregator exclusively focused on the needs ofwealth management enterprises and wealthtech firms who provide comprehensive support to advisors and investors.. It currently supports over 6,000 advisory firms, more than 70 redistribution partners, and over 16,000 financial advisors, amounting to over $1trn in investor assets aggregated daily.

Costello said, “The benefits of partnering with a specialist like ByAllAccounts are significant. Depending on the exact investment use case, we provide up to 92% higher quality investment data–giving you a truly holistic view of investors’ portfolios. In turn, we help you deliver better customer outcomes, uncover countless operational efficiencies, and extract optimal value from the data you’re accessing.”

Portfolio Analytics – A new tool

Morningstar Wealth is always exploring how it can improve the ByAllAccounts platform so it can cater to all a client’s needs. Its latest effort to do this came through the launch of a Portfolio Analytics solution. The new feature is a deep level of analytics that can be applied to aggregated portfolios through a turnkey integration with Morningstar Licensed Data. It can provide in-depth data enhancements on aggregated investment holdings by appending fund and equity attributes. This includes regional breakdowns, asset allocations, equity and fixed-income sector exposure and fixed-income style boxes. Through this, clients benefit from improved operational efficiency and the ability to provide more accurate, personalised investing advice.

Costello stated that the Portfolio Analytics solution shifts the paradigm for what WealthTechs should expect from an aggregation partner. “While there is a perception that aggregation has become more commoditized, the truth is that as data accessibility becomes more open, the standards and quality of the data are not keeping pace and in fact, are falling behind. If you are catering to advisors and investors, it’s imperative to construct a tech infrastructure with vendors who specialize in the requirements of this market. Otherwise, you may encounter disconnected experiences and operational inefficiencies that can impede your growth.”

Through the Portfolio Analytics solution, clients can access greater information about an investment portfolio, bypassing multiple stages of standardization and enrichment. With this, an advisor can provide better personalization and client engagement. One of the most important outputs of the tool is that it helps advisors differentiate themselves in a time where customer demands put an emphasis on the personal touch.

Another benefit of ByAllAccounts data enrichment capabilities including the Portfolio Analytics solution is it helps firms leverage the latest developments of AI by providing clean data. Generative AI has taken the world by storm and companies are rushing to see how they can use it. The technology is likely to have a myriad of use cases within the world of finance, whether it is for customer-facing chatbots, automating internal workflows, or supporting employees with understanding data. There is a big opportunity in using the technology. However, firms might try to instantly integrate technology with their existing infrastructure, to which Costello warned that without clean data the technology is not worth it.

“We’ve all heard the adage ‘garbage in, garbage out,” he said. “It emphasises that the quality of data fed into a model directly impacts the reliability of its outputs. Clean, accurate, consistent, and complete data is essential for maintaining the integrity of the results. In the context of investment accounts, clean data is paramount for making well-informed decisions because errors or inaccuracies in the data can lead to flawed insights and predictions. Generative AI relies on identifying patterns in data to produce coherent and meaningful outcomes. Clean investment account data, featuring well-organized transaction histories, clear categorizations, and accurate labels, enables the AI to learn the nuanced patterns associated with various investment strategies, risk levels, and market conditions.”

There are several reports that paint a worrying picture for data scientists. Stats range, but it is estimated data scientists spend between 60% and 80% of their time cleaning and preparing data. By gaining access to clean and structured data, such as that offered through ByAllAccounts, teams can focus more time on more important tasks.

Supporting data aggregation of cryptocurrency

The cryptocurrency space continues to attract interest from retail investors. In fact, the market cap of the cryptocurrency sector is over $1trn, according to data from Statista., An

Costello noted that ByAllAccounts has received many requests from its WealthTech platform solution partners, advisors and investors regarding viewing this asset type as a part of a holistic financial picture. Regulators are  giving  the cryptoasset market more attention as well.

The US is among the countries looking to increase crypto regulation. The US Treasury Department and Internal Revenue Service (IRS) recently proposed changes to tax reporting rules that would mean brokers and exchanges would need to increase tax reporting in the next few years. Similarly, the US Securities and Exchange Commission proposed an expansion to the custody rule which would require advisors to keep more detailed records of trades and transaction activity and position information for each client account it has custody on.

The platform provides investor-led aggregation of cryptoassets to allow advisors to have a read only view of their client’s crypto asset investments so they can deliver holistic financial advice and enable performance reporting while not having custody of the assets.

Costello said, “Where our service comes into play is making it as easy as possible for an advisor to collect information about these asset types held by their clients.  We have partnered with Turnkey Labs to enable aggregation of this asset type.  However, viewing this data is just one part of the equation. Advisors also need to seamlessly integrate this data into their reporting platforms.  We are fortunate enough to have built a strong network of partners within the wealth technology space, so most major wealth reporting platforms used by advisors to calculate performance, rebalance, and engage their clients, those platforms incorporate our aggregation service.”

Open banking’s arrival to the US

When talking about the use of data within wealth management, it is hard to avoid the importance of open banking. This is a system that was pioneered by the European Union where it launched the first related regulations in 2015. Open banking is a way for consumers to share their  data held at  financial institutions with third-parties, with the goal of helping the consumers get more personalised support. Open banking initiatives have since taken shape around the world, with the global open banking market estimated to be worth $20bn in 2022 and predicted to be worth $122bn by 2032.

While open banking holds a massive opportunity, the US is lagging behind. Costello said, “In the US, consumers do not currently have an affirmative right to the data that their financial institutions maintain about them. As in other areas of financial services, the US has been taking a more market-based approach. Consumer-permissioned data sharing and access has been largely unregulated even as wealth management firms and banks are highly regulated.”

Things are starting to change in the US, with the Consumer Financial Protection Bureau (CFPB)  currently finalizing the first phase of open banking rule-making which is expected to be completed in early 2024. While Costello was appreciative of the efforts made by the CFPB, he doesn’t believe the new guidelines will do enough to support the investment data ecosystem.

He added, “As a result, the joining of investment data and open banking will be an imperfect union to start.  For this reason, ByAllAccounts continues to partner with financial institutions to establish standards-based direct data connections for advisors and investors to close the regulator gaps.”

ByAllAccounts is supportive of the increased data transparency and reduced risk that open banking provides. “We help investors stay in control of their data while also managing liability across stakeholders in the investment data ecosystem. The investor provides consent to share data for their specific use case—controlling what information their advisor can access. And because the investor’s credentials are never disclosed to their advisors (or ByAllAccounts), inherent risks to both the investor and their advisor are reduced. Along with enhancing the investor/advisor relationship, this also supports advisors’ SEC and FINRA requirements for due diligence and risk management of their technology providers.”

Open banking  allows for advisors to become more efficient and provide critical insights that can really benefit their clients. “As an example, an outside 401(k) could become a rollover IRA if a client switches jobs or retires. If an advisor is already considering that account for asset allocation, there’s a chance to turn it into a managed account. In addition, many advisors who use aggregation monitor their clients’ accounts for potentially fraudulent transactions, often identifying issues before the client.”

Morningstar Wealth is leading the support for open banking within the US, acting as the voice of the advisor with regulators, standards bodies, and financial institutions, advocating on behalf of the wealth management industry. Over the past two decades, the ByAllAccounts product has pioneered data aggregation for investment use cases, leveraging its deep understanding of the space to ensure the proper data elements are made available via open banking connections and the role of the advisor is incorporated in governance mechanisms.

Costello added, “As a respected advocate and a guiding light on behalf of investors and their advisors, we’re committed to supporting the investment and open banking ecosystems. We do this through proactive government relations and by serving as active members in trade bodies.”

This is not all Morningstar Wealth is doing to support open banking. It offers reliable data access for investment use cases by moving to direct connections with providers, reducing the use of less-reliable methods. By the end of 2023, over 80% of data will be accessed through these direct connections. It is also collaborating with financial institutions to mitigate operational costs and risks by leveraging direct connections.

As to why ByAllAccounts is the best choice for open banking within wealth management, Costello said, “Quite simply, our reach and quality.  Morningstar ByAllAccounts is committed to empowering advisors and their investors with high-quality financial data tailored to investment use cases. Streamlining the delivery of the data to target systems is a three-step process of acquiring the data, enriching it, and delivering it to target systems. Investment use cases require special considerations at each step of the way. When signing bilateral agreements, the aggregator should ideally understand the investor-advisor relationship and ensure that the advisor can receive the required data without undue burdens.”

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