30/09/2024
You last invested in several stocks and mutual funds through several brokers and MF distributors quite some time ago. But you are unclear. One day you realize that you need to start treating financial planning seriously. You take the help of a financial professional to assist you in sorting things out.
Getting additional information about you and your previous transactions is the first thing your financial advisor would advise you to do. They are interested in your actions and investments. So, feeling pleased with your work, you distribute the excel document you made.
But after carefully examining the spreadsheet, they sigh in disappointment. Nothing describes your transaction history or investing approach. They assert that the data is inconsistent. They now want more details about you, including your risk profile. They must verify the information about your investments. Your credentials cannot be shared. You then go out to collect all the data once more.
Unfortunately, all of your data isn’t gathered in one place. It is scattered throughout several websites, including aggregators for mutual funds and your bank. Your insurance provider, external and mutual fund firms, and others may have access to information about your other investments. In essence, you can’t access your data from a single touchpoint because that would need manual assembly.
What if a different approach didn’t involve any of these hassles? Account Aggregators will carry out that same task. On August 19, the capital markets regulatory body SEBI joined the account aggregator framework. Due to the move, clients will be allowed to speak with financial service providers about their stock and mutual fund holdings.
Account Aggregator, sometimes abbreviated as “AA,” is a non-banking finance corporation (NBFC) under the RBI’s jurisdiction, making it easier to gather financial data with the customer’s permission. They’ll link “Financial Information Users” (FIU), like financial advisers, brokerage firms, etc., to “Financial Information Providers” (FIP), like asset management firms or banks.
Let us simplify this.
The FIU or financial adviser will first ask the AA to disclose the relevant investment information, including the most recent, real-time data.
The AA will get a request from the FIU or the financial advisor to submit the relevant investment information, including the most current, real-time data. Before disclosing the report, the AA will seek your consent. After receiving the user’s consent, the AA will contact the FIP or mutual fund companies and ask them to provide all the investment data. The FIP will transmit the encrypted data to the AA in real-time before sending it on to the FIU (your financial advisor). Always remember that the AA is only a route with no freedom to the information.
“There shall be adequate safeguards built in IT systems of FIPs in the Securities markets to ensure that it is protected against unauthorized access, alteration, destruction, disclosure or dissemination of records and data,” Sebi said.
Additionally, FIPs must abide by the code of conduct stated in Sebi’s rules, which includes handling customer complaints. Furthermore, FIPs are obligated to prominently display the names of the account aggregators they use on their websites.
It was challenging to put this together. After all, account aggregators can only carry out their responsibilities if the sources of financial data are willing to provide information. You must collaborate with many entities. Numerous organizations must work together. While many banks and NBFCs have joined the framework, some participants have been less eager.
Therefore, SEBI’s participation in the account aggregator is significant news. They might now push stockbrokers and mutual fund companies to join the account aggregator framework. This action will strengthen the financial service providers governed by the Reserve Bank of India. It may be ground-breaking!