20% Increase in Cash Flow Analysis Completion Rate with Automated Setup
Executive Summary
Harrington Legacy Advisors, a prominent RIA firm, struggled with low client engagement in the initial setup of cash flow analyses, leading to incomplete financial pictures. Golden Door Asset integrated Plaid's API to automate transaction data import into eMoney Advisor, drastically simplifying the process. This resulted in a 20% increase in cash flow analysis completion rates, enabling advisors to provide more informed and personalized financial advice.
The Challenge
Harrington Legacy Advisors, managing over $500 million in assets for approximately 250 high-net-worth clients, faced a significant hurdle in their client onboarding process. Their existing workflow for cash flow analysis relied heavily on manual data entry. Clients were required to gather and input financial information from multiple sources, including bank statements, credit card statements, and investment account reports.
This manual process proved to be cumbersome and time-consuming, leading to a low completion rate of cash flow analyses. On average, only 60% of new clients completed the initial setup within the first 90 days. This meant that advisors were often making recommendations based on an incomplete understanding of their clients' financial situations.
The consequences were tangible. For example, a client might underestimate their monthly spending, leading to inaccurate budget projections. Consider the case of Mrs. Eleanor Vance, a retiree with a $2 million portfolio. Before automation, her manual cash flow input missed her significant charitable donations averaging $10,000 per year and underestimated her travel expenses by $5,000 annually. This inaccurate picture painted by the incomplete analysis resulted in advisors recommending a withdrawal rate that was unsustainable in the long term. Similarly, for younger clients like Mr. David Chen, neglecting smaller but frequent expenses (streaming services, subscription boxes, and occasional splurges) amounting to $300-$500/month skewed his available discretionary income, leading to potentially risky investment choices based on flawed data. The lack of comprehensive cash flow data led to an estimated 15% decrease in the accuracy of initial financial plans and a corresponding increase in the time advisors spent revising those plans.
The manual data entry burden also placed a strain on Harrington Legacy Advisors' internal resources. Advisors and their support staff spent a significant amount of time chasing clients for missing information and assisting them with the data entry process. This time could have been better spent on higher-value activities, such as client relationship management and strategic financial planning.
The Approach
Golden Door Asset recognized the critical need to streamline the cash flow analysis setup process for Harrington Legacy Advisors. Our approach centered on automating data aggregation through a secure and reliable integration with Plaid.
The strategic thinking was based on the following principles:
- Client Experience First: We aimed to minimize client effort and maximize their engagement with the financial planning process.
- Data Accuracy and Completeness: The automated solution needed to ensure the accuracy and completeness of the imported data.
- Security and Compliance: Data security and adherence to regulatory requirements were paramount.
- Seamless Integration: The solution needed to integrate seamlessly with Harrington Legacy Advisors' existing eMoney Advisor platform.
Our decision framework involved evaluating several potential data aggregation providers. Plaid was selected due to its robust API, wide coverage of financial institutions, and strong security credentials.
The implementation process involved the following steps:
- Needs Assessment: We conducted a thorough needs assessment to understand Harrington Legacy Advisors' specific requirements and pain points.
- API Integration: We developed a custom integration between Plaid's API and eMoney Advisor.
- Security Protocol Implementation: We implemented robust security measures to protect client data, including encryption and multi-factor authentication. We ensured compliance with all relevant regulations, including GDPR and CCPA.
- Pilot Program: We launched a pilot program with a small group of Harrington Legacy Advisors' clients to test the solution and gather feedback.
- Training and Support: We provided comprehensive training and support to Harrington Legacy Advisors' advisors and staff on how to use the new system.
- Full Rollout: Based on the success of the pilot program, we rolled out the solution to all of Harrington Legacy Advisors' clients.
We carefully considered alternative solutions such as using screen scraping methods, but dismissed them due to security concerns and reliability issues. We also evaluated building a custom data aggregation solution in-house, but this was deemed to be too time-consuming and costly. Partnering with Plaid allowed us to leverage their expertise and infrastructure, enabling us to deliver a robust and reliable solution quickly.
Technical Implementation
The technical implementation involved leveraging Plaid's API to securely connect to clients' financial institutions and import transaction data into eMoney Advisor.
Here's a breakdown of the key technical aspects:
- Plaid Link: We implemented Plaid Link, a secure and user-friendly interface that allows clients to connect their bank accounts and other financial institutions to the system.
- Data Aggregation: Plaid's API was used to aggregate transaction data from multiple sources, including bank accounts, credit cards, and investment accounts.
- Data Mapping: We developed a custom data mapping process to ensure that the imported data was correctly mapped to the appropriate fields in eMoney Advisor.
- Transaction Categorization: Plaid automatically categorizes transactions, but we implemented a secondary layer of categorization using machine learning algorithms to further refine the accuracy of the categorization process. This included the development of custom rules to handle specific types of transactions that were not accurately categorized by Plaid.
- Security: All data transmitted between Plaid and eMoney Advisor was encrypted using industry-standard encryption protocols. We also implemented multi-factor authentication to protect client accounts. Regular penetration testing was conducted to identify and address any potential security vulnerabilities.
- eMoney Advisor API Integration: The imported data was seamlessly integrated into eMoney Advisor using its API, ensuring that advisors had access to the most up-to-date financial information for their clients. We utilized eMoney’s Cash Flow Module and configured it to automatically update based on the Plaid imports. We also set up automated alerts to notify advisors of any significant changes in a client's cash flow.
- Error Handling and Monitoring: We implemented robust error handling and monitoring mechanisms to identify and resolve any issues that arose during the data aggregation and integration process.
- Reconciliation: We implemented a reconciliation process to ensure that the imported data matched the actual balances in clients' accounts. This involved comparing the imported data to bank statements and other financial reports.
The system was designed to handle a high volume of transactions and to scale as Harrington Legacy Advisors' client base grew. We used a microservices architecture to ensure that the system was modular and resilient. The entire infrastructure was deployed on a cloud-based platform to provide scalability and reliability. The technical choices ensure a strong and smooth integration process.
Results & ROI
The implementation of the automated cash flow analysis setup resulted in significant improvements for Harrington Legacy Advisors:
- Cash Flow Analysis Completion Rate: The cash flow analysis completion rate increased from 60% to 80% within the first 90 days, a 20% improvement. This meant that advisors were now able to provide more comprehensive financial advice to a larger percentage of their clients.
- Time Savings: Advisors and support staff saved an average of 2 hours per client on the initial setup process. This time savings allowed them to focus on higher-value activities, such as client relationship management and strategic financial planning.
- Improved Data Accuracy: The automated data aggregation process significantly reduced the risk of errors associated with manual data entry. This led to more accurate financial plans and more informed investment recommendations. Data error rate decreased from 7% to under 1%.
- Increased Client Engagement: Clients appreciated the ease and convenience of the automated setup process. This led to increased client engagement with the financial planning process and improved overall client satisfaction. Client satisfaction scores, measured through post-onboarding surveys, increased by 15%.
- Increased AUM: Harrington Legacy Advisors also saw a correlation between the improved onboarding process and an increased rate of new client acquisition. They attributed approximately 5% of their new AUM growth in the subsequent quarter to the enhanced client experience stemming from the automated cash flow analysis.
- Cost Savings: The reduction in manual data entry and improved data accuracy resulted in cost savings for Harrington Legacy Advisors. We estimate that they saved approximately $15,000 per year in staff time and reduced the cost of rework associated with inaccurate financial plans.
The tangible benefits include advisors being able to build a complete financial picture of their clients from the beginning of the relationship, resulting in better investment decisions and higher client satisfaction. The ROI on the investment in the Plaid integration was estimated to be 3x within the first year.
Key Takeaways
For other RIAs and wealth managers considering automating their cash flow analysis process, here are a few key takeaways:
- Prioritize Client Experience: Focus on making the financial planning process as easy and convenient as possible for your clients. Automating data aggregation is a great way to improve the client experience and increase engagement.
- Choose the Right Technology Partner: Select a data aggregation provider with a proven track record of security, reliability, and accuracy. Ensure that the provider integrates seamlessly with your existing technology stack. Plaid or similar tools are essential partners.
- Invest in Training and Support: Provide comprehensive training and support to your advisors and staff on how to use the new system. This will ensure that they are able to effectively leverage the technology to provide better service to their clients.
- Focus on Data Accuracy: Even with automation, it's important to monitor the accuracy of the data and implement processes to reconcile any discrepancies. Don't rely solely on automation; build in verification steps.
- Communicate the Benefits to Clients: Clearly communicate the benefits of the automated system to your clients. Explain how it will make their lives easier and enable you to provide better financial advice.
About Golden Door Asset
Golden Door Asset builds AI-powered intelligence tools for RIAs. Our platform helps advisors streamline client onboarding and provide more personalized financial advice. Visit our tools to see how we can help your practice.