It has been quite some time that you have invested money in a few stocks and mutual funds with multiple brokers & multiple mutual fund (MF) distributors. And one day you feel the need to start taking your financial planning seriously. You seek the assistance of a financial expert to help you sort your finances.
One of the important things which your financial advisor would want you to do is to get more information about your past investment transactions. They would like to know your past investment behaviour. So, you share the excel file you had prepared, feeling proud of your efforts.
But after looking at the spreadsheet, well, they groan in frustration. Nothing describes your investing style or transaction history because the data, they claim, is scattered, inconsistent, and not organised. They need more information about you to know your risk profile. They need to check the data regarding your investments. You can’t share your credentials. And so you set to gather all the data manually.
Unfortunately, your information isn't compiled in a single location. It is dispersed among several websites, for example, your bank and mutual fund aggregators. Information about your other investments is linked to external and mutual fund companies and your insurance company. You can't access your data from a single touchpoint, which would need to be manually assembled.
But what if there was an easier way where no such hassles come in your way?
Well, there’s a way and SEBI's recent move on Account Aggregators will do that.
Capital markets regulator SEBI last month joined the account aggregator framework. Customers will be able to communicate with financial service providers regarding their stock and mutual fund holdings due to the change.
Account Aggregator or AA, is a non-banking finance corporation (NBFC) under the RBI's control that facilitates the collection of financial information with the customer’s consent.
It connects “financial information providers” (FIP) like Asset Management Companies or banks to “financial information users” (FIU) like financial advisors, broking houses etc.
Let us simplify this.
First, the FIU or the financial advisor will place a request to the AA and ask them to share the relevant investment information — this will include the latest, real-time data.
The AA will then get your permission before releasing the information.
Following the user's approval, the AA will contact the FIP or mutual fund firms and request access to all the investment information. The AA will get the encrypted data in real-time from the FIP, which ultimately sends it to the FIU (your financial advisor).
And voila, it’s done – all your investment transaction history assembled at one place.
Here’s what SEBI said about AAs: There shall be adequate safeguards built in IT systems of FIPs in the Securities markets to ensure that it is protected against unauthorised access, alteration, destruction, disclosure or dissemination of records and data.
FIPs shall also follow the code of conduct outlined under SEBI's regulations, which includes resolving client complaints. Additionally, FIPs are required to make the identities of the account aggregators they use widely visible on their websites.
While the above measures make the job a lot easier, it would not have been an easy thing to bring together all the stakeholders function this smoothly. After all, account aggregators can only do their duties if the sources of financial information are ready to provide client data. Multiple entities need to collaborate for the machine to run smoothly.
While numerous banks and NBFCs have joined the framework, other players have been more reluctant.
Nevertheless, the above move by SEBI could bring in greater transparency, ease of access, and a swifter process for all the stakeholders.
It needs to be seen how this pans out in the coming years.
What are your thoughts on this? Do let us know in the comments section below…
Source : SEBI circular
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