In the wake of morningstar’s recent purchase of ByAllAccounts, this seems like a particularly good time to take a look at a firm called Quovo. Without discussing the relative merits of the Morningstar purchase, I think it is fair to say that the level of satisfaction throughout the industry with account aggregation has been rather low. Before I tar and feather the whole industry, let’s take a step back.

Broadly speaking, there are multiple arguments for using an account aggregation service. One is for performance reporting, another is for automatically populating other applications such as financial planning software. Providing clients with a consolidated view of their holdings is yet another reason.
Performance reporting requires a high degree of accuracy down to the individual transaction level, and there is no room for error. If you are going to furnish performance numbers to a client, from a regulatory and compliance perspective you are held to a high standard. One of the arguments for performance reporting using an account aggregation service is that you can monitor all of the clients’ finances, even held away assets, and if you are overseeing those assets, you can charge the client for your services.

Account aggregation for the purposes of populating financial planning software and consolidated statements is somewhat less demanding. You need the account balances to be correct, but the transaction details are not usually critical to the process. If you currently update account balances in your financial planning software manually, the ability to push aggregated account balances automatically into your financial planning software provides efficiencies by saving time and labor, but transactional data is not necessary.

When account aggregation firms first courted advisors over a decade ago, the impression I had was that they overcharged, overpromised and underdelivered. I remember going to conferences and hearing salespeople tell advisors that they could consolidate all of their data so that advisors could generate performance reports and charge for those assets, including held away assets. It didn’t quite work out that way. In many cases, the data the advisors wanted was not available through direct feeds, so some of the data was incomplete or of poor quality. Just about every advisor I knew at the time who used account aggregation felt that it was better than nothing, but nowhere near what they expected it to be. Using account aggregation to feed data into financial planning software and other applications was not a major consideration at that time because the cost of aggregation exclusively for that purpose was too high, and the technology at the time didn’t support that type of integration.

Over the years, much has changed, but much has remained the same. Using aggregated account balances to populate applications such as financial planning software is gaining traction. The usability of the data for the task is generally believed to be sufficient. It has also become more affordable. To cite just one example: Until recently, MoneyGuidePro offered aggregated balances through a partnership with CashEdge priced at $1,500 per year. At the 2014 Technology Tools for Today Conference, MoneyGuidePro announced a deal to offer account aggregation through Yodlee with an introductory price of $365 per year. At a dollar a day, it is difficult to imagine a reason for an advisor who uses MoneyGuidePro NOT to use account aggregation.

With regard to performance reporting and data aggregation, the recent past has been a mixed bag. Although the quality of data from ByAllAccounts in particular is better than it has ever been, I still hear complaints that performance reporting falls short of expectations. Many firms I’ve talked with tell me they have a person that spends a substantial amount of time dealing with reconciliation issues related to their account aggregation services. Furthermore, since FISERV purchased CashEdge in 2011, ByAllAccounts has pretty much been the only game in town for independent advisors who want to aggregate accounts for performance purposes (Private Client Resources has been aggregating data for its clients, but until recently few independent RIA firms used it.)
One could argue that, even before Morningstar’s purchase of ByAllAccounts, the aggregation space was ripe for some new competitors, and now it certainly is. It should come as no surprise then that a number of firms are launching, or about to launch, competing aggregation services. One of the more interesting entrants to the space is Quovo.

It appears that Quovo was initially founded to serve individual investors as a sort of crowd-sourced investment platform, but it has since realized that its technology can be valuable to financial advisors, portfolio managers and other financial services firms, so the firm has changed its focus to the institutional side of the business. Quovo was founded by two Harvard graduates, Niko Karvounis and Lowell Putnam. Karvounis previously worked at LexisNexis, so he has familiarity with big data. Putnam worked as an associate at Lehman Brothers, and he is the great grandson of George Putnam, who founded the Putnam mutual funds in 1937.