| TRUST & INVESTMENT PRODUCTS |
Bankruptcies are at record-breaking levels partly because it has become so hard for consumers to get a handle on their financial activities, futurist Frank Feather maintains.
Those who find Feather's assertion extreme must, nonetheless, agree that the terms "net worth" and "consolidated statement" are becoming buzz words. Both reflect consumers' demands that financial institutions help simplify their customers' increasingly complex financial lives.
"The average middle- to upper-middle income individual has accounts with seven different financial institutions," says Rob Rosen, chief executive of Vertigo Development Group, a provider of financial planning software. Vertigo's One On One Banking system is used at the virtual branches of Security First Network Bank, which has made much about giving the average individual a quick sense of his net worth.
Security First Technologies, the SFNB subsidiary relicensing the SFNB secure platform says it will integrate customers' banking, bill-paying, credit card, brokerage and mutual fund activity into a single statement come the second quarter.
Users of Virtual Financial Manager, SFNB's platform, already enjoy a substantial degree of account integration, presented in a summary statement as soon as they log on. Since last October the host bank's information has been supplemented by credit card data, pulled from processor, Total Solutions Inc., and bill payment data, pulled from processor, Checkfree Corp.
Security First shortly will add brokerage and mutual fund data, pulled from BHC, a Philadelphia-based processor. However, as Michael McChesney, chief executive of Security First Technologies, explained, the securities' data will pertain to the host bank's own securities activities, not to the activities of a competing, nonbank institution.
Given that individuals hold accounts with numerous institutions a truly consolidated statement must cross institutional boundaries.
The pan-institutional statement
A confluence of accounts could occur in one of three ways, McChesney maintains. Scenario one, the individual does the work of downloading discreet account information to his PC and combines it using financial management software, such as Quicken. Scenario two, competing institutions co-operate, pooling information for their mutual customers' good. Scenario three, the bank, with its customer's clearance, accesses his accounts with other institutions and does the consolidation work for him using VFM.
| There's a lot of money to be made pooling services, but not a lot to be made pooling statements." |
| --Rob Rosen, Vertigo Development Group |
One glitch with scenario three (which McChesney recommends) is that all the institutions in question must have made their information available on-line. Today, for instance, if the customer has a regular bank account and a Merrill Lynch CMA account, VFM cannot consolidate them, McChesney admits, because Merrill has not provided such information on the Internet.
In fact, Merrill's Cash Management Account--incorporating investments, savings, (limited) checking, and credit card--is regarded as the pioneer effort in account consolidation. Reflecting the prevailing desire to offer net worth at a glance, Merrill recently updated its 20 year-old CMA product with a consolidated snapshot statement.
Merrill says, through a spokesperson, that it is unlikely to pool its account information with banks for reporting purposes.
Most observers consider such co-operation unlikely, despite recent examples of unprecedented co-operation between investment banks and commercial banks. Vertigo Development's Rosen agrees nonbanks and banks have been swopping their respective securities and trust expertise to target the wealthy, but he doesn't foresee an expansion. "There's a lot of money to be made pooling services, but not a lot to be made pooling statements," he says.
Absent co-operation, McChesney says, "banks need control of the point of consolidation." Otherwise they risk dominance by nonbanks (which will assimilate bank account information into their statements) or by Microsoft (which will control consumer initiated consolidation at the PC, through its Open Financial Connectivity standard).
Matt Cone, business development manager with Microsoft, says with co-operation unlikely near term, "what is acceptable to institutions is to have consumers use Microsoft Money as the consolidator."
David Risher, product unit manager for Microsoft Investor, adds that OFC is simply a file format, "a standard to help institutions pull information together." "Customers want to see all their accounts on one statement, but today there's no way to do that," he continues.
Microsoft Money doesn't cross institutional boundaries yet, but Risher expects it to within this year.
He points out, however, that OFC is not tied to any Microsoft package or operating system, or even to a PC. It could be used by someone accessing the Internet, from any device, using a non-Microsoft browser, he adds.
Leave it to the money mavens
Meanwhile, others underscore the increasingly important role of the financial planner, expecting such an individual to assess the consumer's net worth.
Among them is Bill Wade, senior-vice president with Essex Corp., a third-party provider of insurance and annuities. Essex, in co-operation with AmeriTrade, a securities' processor has co-operated to consolidate what Wade says is 90% of consumers' financial information. "What's missing is just the insured deposit products," he says, adding that a financial planner will handle these.
Given the insured/noninsured product distinction, Wade does not expect the Essex statement ever to become all-encompassing.
However, Sarah Miller, general counsel with ABA, says insured and uninsured products can be reflected on one statement so long as they are clearly distinguished.
Fifth Third Bank has done just that, combining its accounts with those of Fifth Third Securities, its subsidiary, also in Cincinnati.
ting regulatory approval to have both institutions' information on one page was "a tremendous feat," Jenny Wehrmeyer, assistant vice-president says.
istically, the project took one year of programmers' time since the institutions' formerly separate reporting systems had to be combined, she explains.
The results started to become evident in the bank's 415 retail branches in January, following a roll-out of the service to Fifth Third's private banking clients last June.
Fifth Third does not charge for the service provided customers retain a minimum balance (combined across all accounts) of $10,000.
"IRAs and loans are not included in the consolidated statement, but we're working on it," adds Wehrmeyer, who was project manager. Also, as yet the statement is a paper one; just checking account activity is available on-line.
Fifth Third took its consolidation cue from the brokerage houses, says Wehrmeyer.
Asked whether banks and nonbanks are likely to co-operate to consolidate statements, she says, "we are seeing co-operation on the bill-payment side, but I don't know about the investment side."
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