Data aggregators and third-party platforms offer convenience to financial professionals and their clients, but they come with costs and risks, the Delaware Department of Justice warns.
The services, which collect and organize financial data from multiple sources and display it in one place online, can help individuals and financial professionals manage finances, the Delaware DOJ noted in a press release. But before using a data aggregator or third-party platform, an individual should understand how these services operate and know how to protect themselves from potential privacy and security risks.
A financial data aggregator dashboard, also called a personal financial management hub or portal, will display snapshot of the user’s overall finances, including checking and savings accounts, investments, insurance policies and credit balances. Depending on the provider, services also could include financial and tax planning, financial advice, budgeting and home value and mortgage information. Some data aggregation services may have associated fees and costs.
The Delaware DOJ warns that giving access to detailed financial information may have risks. The department offered these tips:
Consider the benefits of using a data aggregator against the risk of giving access to your accounts. The risk is greater when an individual authorizes a third party to facilitate payments, trades or withdrawals of securities or funds on their behalf.
Ascertain whether the data aggregator’s connection to your financial institutions is achieved by screen scraping or application programming interface or both. In screen scraping, the aggregator uses the client’s credentials to sign in to accounts and collect information. In application programming interface, data is transferred from the financial institution to the aggregator without sharing credentials.
Before signing any user agreement or contract, read the terms and conditions and know the rights you are granting to your financial accounts and data.
Make sure the aggregator or the third-party platform will access only the information it needs to provide the service that is desired.
Understand that certain transactions and services you use may come with charges.
Ask about the privacy and data security measures that the service provides, and read the terms of use, privacy and security information.
Determine whether the aggregator or third-party platform stores your credential, if it uses scraping algorithms to collect data from your financial accounts.
Know whether authorized or supplemental users are able to withdraw securities or funds from your accounts. Be careful about granting power of attorney to third-party platforms, and be aware of the powers you are granting.
Do research and due diligence. Search online for reviews, complaints or lawsuits against the data aggregator or the third-party service provider you are assessing.
Determine the kind of liability, if any, that the aggregator or third-party platform bears in case of a consumer loss due to a data breach or unauthorized access. Do they have the financial ability or insurance coverage to provide compensation for your loss? What is the mechanism to resolve disputes related to data breaches or unauthorized access? Be aware that if you share your log-in information with a financial adviser and experience a loss in the account, the custodian could disclaim liability.
If you stop using the service, be sure to cancel your account and terminate the access and rights you have granted to the aggregator or third-party platform. Follow the steps to end the service’s access to your accounts.
To learn more about the risks of data aggregation and ways to protect yourself and your data, go here.
The Delaware DOJ’s Investor Protection Unit also encourages investors to check the registration status of financial professionals at the Finra website.
