Role of AA In Financial Planning And Wealth Management

Source: Precision Financial Services

Massive disruption brought on by digital technology is changing the way we work and conduct business in every industry. Companies who are well-positioned to capitalise on the trend toward remote working, digital payments, and online purchases are witnessing significant revenue growth, often at the expense of incumbents that are slower and less agile in their response to market changes.

It should come as no surprise that digital payments are expected to account for 71% of all payment transactions in India by the year 2025 because of the widespread adoption of such methods as the Unified Payments Interface (UPI), which is one of a number of recent reforms that have shown how far the financial ecosystem has come.

Even if the financial services industry has been hit the hardest by recent disruptions, the ecosystem of account aggregators (AA) is about to experience even more of it. The AA programme is run by the RBI, and its primary objective is to enable customers to make better use of the information they have about their finances with only the click of a button. When the system is fully operational, all of the user’s financial data, including investments, insurance plans, loan records, and bank records, among other things, will be easily available with a single glance.

Although lending fin-techs have been quick to incorporate AA in order to provide their customers with faster and more affordable loan products, the personal finance and investing industry will also see more adoption over time. This is because of the benefits that AA provides. AA can be used in a variety of contexts, including personal financial planning and investment.

More use cases will emerge with the passage of time, but for the time being, let’s examine some of the more important ones:

Effective Investment Tracking and Monitoring


Peter Drucker said that if it can’t be measured, it can’t be improved.

The majority of individual investors spread their money over various money market funds (MFDs), banks, brokers, and insurance companies. The majority of investors have difficulty obtaining a comprehensive view of all of their holdings on a single platform. Unfortunately, the incumbent platforms that do allow this have little choice except to ask users to manually enter their data, which is a technique that takes a great deal of time, or to scrape mutual fund or NSDL statements, which are neither exhaustive nor totally correct.

All of these issues are resolved by the AA ecosystem, which makes it possible for traditional and online financial advisers to give their clients access to a single platform from which they can manage all of their investments. In addition, advisers are able to assess the data and develop actionable insights from their clients’ portfolios with the investors’ express permission, but only if the investors agree.

This will not only make it possible for investors to keep a close eye on their investments in real time, but it will also make it possible for them to make quicker and more informed decisions regarding their holdings, which could potentially result in increased returns and the avoidance of costly mistakes.

Unclaimed or Ignored Investments

Source: The Economic Times

The tracking of assets through the use of a one-of-a-kind identifier (such a mobile number, for example) will ensure that investors do not ignore or forget about various investments made over the course of several years.

It would be a shame to see investors lose or forget their little pots of gold that they had accumulated over a number of years, especially during times of need when the user is not present. According to ET Wealth, unclaimed investments in mutual funds, equities, insurance companies, and so on are reaching record highs (> 82,000 cr).

A considerable portion of unclaimed assets can be attributed to either;

  • Dependents are unaware of the investments after the investor’s death, and
  • Lack of nomination results in a time-consuming and, at times, interminable process of recovering such investments.

The installation of the Unified Nominations Register is supported by a framework that is suitable thanks to the AA ecosystem. A unified nominee registry, or UNR, is a centralised database that stores the nomination information (nominees) of an investor across all of the investor’s assets, regardless of asset class.

All under one roof, platforms for personal finance and asset management can become a part of this ecosystem to assist in making certain that the nominations its users have made are in place, as well as to notify and attend to investments that have not been nominated. Families will no longer have to scramble from pillar to post in order to claim the money that is rightfully theirs in times of need and grief, which will result in huge benefits for the entire investment ecosystem.

Reduce Investment Leakages

Source: Higher Rock Education

The money kept in low-interest current and savings accounts brings in thousands of crores of rupees for financial institutions each year. Because there is either a lack of information or ineffective financial planning, a significant chunk of these deposits are just sitting there doing nothing.

Account Aggregator standards will allow fintech companies in the personal finance area to properly plan and assist depositors to ensure that any funds that are not required to be parked in such accounts can be invested for higher returns. This will be made possible thanks to the adoption of these standards.

It goes without saying that this is a double-edged sword that can result in the loss of assets if individuals choose to take disproportionate risks in order to generate better returns; hence, it is essential for the investor to have the appropriate counsel.

Tax Filings

Source: Mint

A yearly step that should be performed closer to the deadlines for paying taxes is to supply your CPA with all financial transactions and statements from all accounts. Instead, fintech providers like investment advisers can simply use the AA ecosystem to generate and show the core facts that are required for tax filing.

These facts include capital gains, income, and a variety of other types of data. All of the computations and return preparation can be done in the background with only a few button presses.

These are but a few examples of how the Account Aggregator laws can be put into practise, and it’s possible that they’re simply the tip of the iceberg. As the ecosystem continues to develop over the next few years, we anticipate a rush of innovations that will make investing and personal finance more engaging and rewarding for everyone. These developments will take place across the board.

The process of gaining access to our financial information, whether it be for the purpose of filing taxes or merely to remain informed, has been a time-consuming one for the majority of this century due to the fact that our data is dispersed among numerous banking organisations. Spending hours combing through accounts and statements just to find information that ought to be obvious is a waste of time. This is exactly the purpose that the ecosystem of account aggregators aims to achieve.

Even though the ecosystem is still in its early phases, some significant institutions have already signed on, and it is only a matter of time before acceptance becomes the standard.

Ignosis provides ample solutions for Account Aggregator and OCEN ecosystems. You can get Plug-n-play modules for transaction analytics, categorization, FIU & FIP gateways to jump start your AA adoption. Book a call with us today!

  • Posted on October 18, 2022

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