Andrew Zumwalt, M.S.
I consider myself an early adopter of personal finance. I get excited about new ideas and products in personal finance, and, when I can, I like to try out new products and features. I tried out the first peer-to-peer lending platforms, online savings and checking accounts, and other interesting developments in personal finance. However, I had trouble keeping track of everything. Rarely did I want to make a change, but I wanted to have a snapshot of all my finances in one place. About this time, the financial aggregation services were started.
Financial aggregation services pull all of your financial information together into one place. They provide an easy-to-understand overview of your assets and liabilities. They may also provide a quick glance at how closely your spending is matching your budget. The financial aggregation sites are able to provide this service because the client provides them with the usernames and passwords to the websites of the client’s financial institutions.
When I explain this to my students or other audiences, this step usually elicits some excited questions.
1. Aren’t you worried about someone stealing your identity?!
2. What happens when the service closes and they sell all your info?!
3. Are you crazy?!
These are all good questions, so let me answer each in turn.
1. Before I gave all my critical information to the financial aggregation services, I did some digging. First, I checked out the Wikipedia page for Mint.com, one of the largest aggregators. Sometimes, Wikipedia is not the best source, but I find its summary of information useful as a starting point, and it often has references that lead to useful information. The Wikipedia article on Mint.com points to quite a few news articles from the New York Times, the San Francisco Chronicle, and other media outlets. The Wikipedia article also let me know that Mint.com is powered by Yodlee. The Wikipedia article on Yodlee told me that Yodlee actually sells their aggregation software to several major financial institutions and other companies.
After reviewing the materials on Wikipedia and from other news sources, I actually visited both company’s websites to review their security practices and how they work. From Yodlee’s site, I determined that they seem to have strong, secure data protections. From Mint.com’s security site, I found that they only perform read-only actions; they never initiate changes within in my account. Note that I only go to the sites after I have vetted them from other sources. Trusting a site on its own merits can often lead to disaster.
After my review, I determined that the companies were legitimate. After I used the services for a time, I felt vindicated in my decision because Intuit, owner of Quicken and QuickBooks, decided to buy Mint.com on September 14, 2009.
2. In case you forgot, the second question was, “What happens when the service closes and they sell all your info?!” Although I’m not sure what every service would do when they close, recent events do provide some guidance. Wesabe, another financial aggregator, is shutting down their operations. They outline a series of steps they are taking to provide users access to their data until July 31st. On July 31st, they state that the personal data will be erased and the physical hard drives on which the data was stored will be destroyed.
Before Wesabe announced the closing, I had a hard time answering this question. However, I feel much more comfortable talking about financial aggregators, as the bar for closing a service has been set high. However, I would still advocate that individuals using a service that has closed change all their passwords just in case the data is not destroyed as planned.
3. Answering the third question, “Are you Crazy!?” is easy. No, I’m not crazy. From the short time I have tracked personal finance, I have only seen the field grow more complicated. We now have significant 529 plan enhancements, qualified dividends, the bottom 10 percent income tax bracket, Roth 401(k)s, and many more complex changes. Innovations and tools, like the financial aggregation services, help bring order to the complications of our personal finances. Combining the new innovations with education from eXtension, Missourifamilies.org, and the Office for Financial Success helps me and other consumers manage our finances.
In today’s tip, I’ve highlighted financial aggregators as a recent innovation in personal finance. I’ve also highlighted an approach to vetting the services and doing the research required to determine if you are comfortable sharing your information. As always, I’m interested in your feedback; if you have a comment, question, or concern, feel free to contact me at ZumwaltA@Missouri.edu.
3 comments:
You could call me old fashion, but I've stayed away from financial integration sites such as mint and wesabe. I would call myself as one of the most tech savy individuals, but there's just something that doesn't site well with me about giving one company all of my passwords and account information. Instead, I've built my own encypted excel/database and update it manually. I just know I'll sleep better than wonder if they ever really erased hard drives.
Good entry. Personally, I'm more of an index fund follower myself (very conservative). This puts some justification to it. That is very interesting article and good information about financial aggregation.
information
Thank you for sharing the information. Here I would like to add that besides providing the best financial services to their clients, these finance aggregator help their clients to get loans at easy terms and conditions and even at cheaper rates by referring them to financial institutes for the loan application.
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