Hooray for real innovation in wealth management – a long overdue improvement that protects and works better for the savers and investors. I can’t recommend 99% of the budgeting tools or apps out there to my clients. As a fiduciary, any and all advice must be in my client’s best interest. Up until now, the only way to have your spending patterns and investment accounts aggregated was to manually enter the data or give your passwords to a third party like Mint or Yodlee. Despite the convenience, most people don’t know that by doing so, they are taking on the risk of loss from their account. That’s right, they just got the financial institution off the hook for the security of their account. Why? Because the small print in the service agreements at virtually all the banks and brokerage firms state that if you share your username and passwords, or credentials, with a third party, they are not liable if your account gets hacked. WOW – Who knew? The regulators are not on top of this one either.
The best (not just ok) wealth advisors help their clients navigate the opportunities and threats. First, do no harm. That is the starting point, middle and end goal when providing advice.
So you can imagine my joy at hearing that there is a movement afoot to develop much safer APIs (Application Program Interface) instead. Well hello brave new world! Coming soon, this will be a tremendous improvement for investors who want their advisor to have the 360 degree view of their finances. At last a way to have the convenience and the security. Does your advisor or bank already offer a complete view of your accounts? If so you may want to ask them how they accomplish that. If you need to enter your passwords to pull in your other accounts you are at risk. If you want this advisor’s advice? Change your passwords now and wait for the next generation of data aggregation. Are your current advisors, banks or brokerage firms encouraging you to put the safety of your accounts at other institutions at risk? It is a wide spread practice. When I ask the vendors or other advisors about the exposure to their clients’ accounts, I get one of two answers – either “the convenience justifies the risk”, or “everyone is doing it so it must be ok”. Is that in your best interest? I don’t believe you can be a fiduciary and run a firm that way. Bleeding edge and your money? Not on my watch. You deserve better than that when trusting people (not to mention paying them), to help you protect your life savings. Please comment and spread the word.