SELECTING A DATA AGGREGATION VENDOR? HERE ARE 5 QUESTIONS YOU SHOULD ASK

Finding the ideal data aggregation service for your business involves strategic questioning. It’s easy to gravitate toward solutions with extensive source coverage, like custodians and banks or comprehensive product pricing. These features are beneficial for offering a complete financial overview to your front-office advisors and clients seeking holistic insights. However, if you aim to establish an accounting book of record (ABOR) that serves as a cornerstone for essential investment management and reporting tasks, you need to delve deeper into the vendors’ methodologies. Here are five critical questions to guide your evaluation process and pinpoint the optimal solution.

QUESTION #1: HOW IS THE DATA COLLECTED?

When selecting a vendor, prioritize those with direct links to multiple custodians and confirm that these connections operate daily and are subject to continuous monitoring. Determining whether the vendor offers notifications for delayed or corrupted files is important. If your goal is establishing an ABOR, be cautious of vendors using existing client portals instead of developing direct integrations.

Opting for direct data aggregation offers access to a wide range of sources at a lower cost but only provides notifications when data is outdated. Additionally, website connections are prone to disruptions due to password changes, while direct connections are far more reliable and less susceptible to connectivity problems.

QUESTION #2: WHAT ARE THE QUALITY CONTROL (QC) PROCEDURES?

Inquire about the methods to verify data accuracy and completeness to ensure compliance with your firm’s data governance standards. Determine whether the vendor can standardize the data to meet your firm’s requirements. Some vendors offer integration services, while others provide comprehensive, “white-glove” solutions, including connection, data normalization, and management. Although more expensive, the “white-glove” service significantly enhances data quality assurance, benefiting the firm and its clients.

Additionally, ensure that the timing of control checks is consistent with your internal service-level agreements. These checks should ideally be performed daily, with clear visibility into any anomalies that still need to be addressed. Firms incur extra financial and reputational risks when critical business functions rely on this data. Therefore, any firm creating an ABOR must thoroughly understand the vendor’s quality control processes and supplement them internally.

QUESTION #3: WHAT IS THE PROCESS FOR ONBOARDING CLIENT ACCOUNTS?

In today’s digital age, users often expect quick and straightforward setup processes, anticipating that everything can be ready in just a few minutes. This expectation is usually the case when vendors utilize financial institutions’ client portals and client logins, facilitating secure and swift account additions through intuitive applications.

However, setting up an Accounting Book of Record (ABOR) is more intricate. Each institution has unique authorization procedures for client data distribution, adding significant operational complexity in identifying and following the correct authorization protocol for each data source. It is crucial to inquire about the vendor’s involvement in this process. They should assist in managing these administrative responsibilities to alleviate some operational burdens.

QUESTION #4: WHAT IS THE PROCESS FOR ONBOARDING A NEW SOURCE?

Establishing a source for an Accounting Book of Record (ABOR) involves creating a dependable connection and establishing robust procedures. Each new source can present unique challenges, particularly with transaction mappings and the need to reassess Quality Control (QC) processes. Anticipate encountering more problems initially, as certain transaction mapping issues may only arise during specific events, such as intricate corporate actions. When choosing a vendor, evaluate their methodology for integrating new sources and how they adapt their QC procedures to handle these challenges.

QUESTION #5: DOES THE VENDOR SUPPORT DIFFERENT LEVELS OF SERVICE FOR MULTIPLE SCENARIOS?

You may have two requirements: an Accounting Book of Record (ABOR) for held-away accounts where your firm manages investments and a snapshot view of other accounts necessary for financial planning. Aggregating alternative investments, like private equity, can be particularly challenging due to the lack of standardization and frequent delays. Due to their manual construction and valuation processes, these instruments cannot update daily.

In contrast, other investment accounts—such as bank accounts, credit cards, loans, insurance products, retirement accounts, and directed brokerage accounts—are more easily collected electronically. If your needs are limited to obtaining snapshots on specific dates, there’s no justification for incurring high processing fees for daily feeds with extensive quality control procedures.

FINAL SELECTION CONSIDERATIONS

When choosing a data aggregation vendor, it is essential to find a solution that aligns with your business requirements and balances the overall cost of ownership. If your operations demand high-quality data for investment management, be prepared to invest more and dedicate time to evaluating each vendor’s processes thoroughly.

It’s crucial to clearly define your data and operational needs to ensure the chosen vendor can provide precise data and facilitate the onboarding of new sources and clients. If your business requires an Accounting Book of Record (ABOR) for certain segments and snapshot views for others, assess whether a single vendor can offer a flexible model to meet these varied needs.

HOW MERADIA CAN HELP

Meradia possesses a wealth of expertise in data management and operational models across the front, middle, and back offices. We’ve assisted numerous firms in transitioning from outdated operating models to modern, target models that foster growth, reduce costs, and minimize the risks linked to temporary fixes. We can pinpoint your firm’s unique requirements for automated data aggregation, assess potential providers, and implement a tailored solution that aligns with your business objectives.