Financial Aggregation Platforms: Convenience at a Cost

By Lauren Van Buren

It is no surprise that Americans are willing to make sacrifices in exchange for convenience. The way we manage our finances is no exception. In a 2017 survey, 62 percent of smartphone owners stated that they used an online banking application, and 26 percent said they wanted their mobile devices to track their spending. Meanwhile, only 10 to 14 percent of Americans still use cash as their primary form of payment.

For those in the 26 percent, financial data aggregation platforms such as Mint and Personal Capital allow users to view their investments, savings, insurance policies, and credit balances in one spot, often referred to as a “dashboard” or “hub.” To effectuate this objective, customers agree to provide the application with the login credentials for all of their financial accounts.

The Financial Industry Regulatory Authority (FINRA) recently issued an Investor Alert warning investors about the risks of using financial data aggregation platforms. Specifically, the Alert cautions consumers about the potential increased vulnerability to cyber fraud, unauthorized transactions, and identity theft. While these platforms are not presumptively unsafe, individuals should take precautions before handing over their login credentials.

Research the company providing the service. A quick Google search can help identify users that have experienced security issues with the platform. Moreover, ensure the company prioritizes security by offering two-factor authentication.

Create the account using a different email address.  If your primary email account is hacked, the hacker might be able to reset your password on the data aggregation platform to gain access. To mitigate this risk, use a unique email address when you sign up for the financial aggregation service. An email address that you have not provided to other third parties is much less likely to be the target of a phishing attack.

Monitor your accounts to quickly detect identity theft. Each of the nationwide credit reporting companies are required to provide consumers with a free credit report once every 12 months upon request. Take advantage of this, regardless of whether you elect to use a financial data aggregation platform.

Read the terms and conditions. Read the user agreement to ensure you are not authorizing the application to use your financial data for any other purpose, or make payments on your behalf. Moreover, you should verify that the platform will access only the information it needs to provide the service to you.

One article suggests that data aggregation technology should be used in evaluating an individual’s creditworthiness. This process would enable a bank to review an applicant’s recent transaction history to assess the applicant’s ability to repay a loan. If this makes you uncomfortable, you should avoid signing up for a platform that collects all of your account information and retains the right to share this information with third parties.

Reading Your Mutual Fund Prospectus Like a Pro

By Paul Vargo

To the average retail investor, reading and understanding a prospectus can be a daunting task.  A prospectus is an informational packet created to assist investors in understanding the securities that they wish to invest in.  For example, a mutual fund prospectus will describe the objectives, risks, and other essential information about the fund.  Unfortunately, many average investors see these packets as long and difficult to understand and will often discard or ignore the prospectus completely.  By doing this, the investor may be making a costly mistake and taking a position in a fund that is unsuitable.

When an investor is determining if a mutual fund is right for them, they should consider these five things:

  • Investment Strategy
  • Fees
  • Portfolio Turnover
  • Limitations of Redemption

Investment Strategy

The first thing an investor should look at is the investment strategy.  The investment strategy tells the investor who should invest in the fund.  The investment strategy should give the investor a basic understanding of what the fund’s goals are.  The investment strategy will also tell the investor what kind of investments the fund holds and the associated risks.


The next thing a mutual fund investor should look at are the fees associated with the investment.  There are generally two types of fees associated with mutual funds: the load and the annual expenses.  The load is usually expressed as a percentage and is a one-time fee charged to the investor.  For example, a 5% front-end load on a $1,000 investment would be $50.  Thus, an investor with $1,000 to invest would be investing $950 into the actual fund.  Annual expenses, on the other hand, are paid out of the funds general assets and while the investor may not directly see this expense, it important to understand that it exists.  Essentially, the higher the annual expense, the less money the investor will return on investment.  As an investor, it is important to understand how these fees can eat into your profits.

Portfolio Turnover

Portfolio turnover is a percentage showing how often the assets in a mutual fund are turned over.  Because portfolio’s that turnover at high percentages generate high capital gain taxes, an investor needs to be aware of how this may affect their financial situation.  When investments have higher tax rates, investors are left with less money and diminished profits.  Thus, a tax-savvy investor may want to invest in a passive fund with lower portfolio turnover rates.

Limitations of Redemption

Understanding the limitations of redemption should be one of the most important things to an investor because it shows an investor how quickly they will be able to access their money.  While mutual funds are typically not too difficult to sell, there may be other restrictions placed on the investor.  Thus, it is vital for an investor to know how and when they plan on getting out of an investment before they purchase it.

Protecting Against Advance-Fee Scams

By Brandon M. Peck

Investors, who have been harmed financially in the past or warned of the market’s volatile downturns, find particular comfort in iron-clad guarantees from solicitors when considering an investment.  Aware of the comfort that the word “guarantee” can provide to potential victims, financial scammers abuse it as a tactic to make their investment pitches look more appealing.  Scammers go to great lengths to appear legitimate, which makes it difficult for targeted investors to determine whether a solicitation is genuine or fraudulent.

On February 16, 2018, the Financial Industry Regulatory Authority (“FINRA”) issued an “investor alert” that warned investors of imposter scams that involved scammers posing as “regulators” and touting the word “guarantee” in order to increase their perceived legitimacy and credibility while making fraudulent investment pitches.

Through a series of phone calls, the financial scammer seeks to build a personal relationship with the investor.  Scammers often also send investors official-looking documents, complete with logos and seals.  In fact, the recent imposter scams featured scammers using FINRA’s name and logo in letter correspondences to potential victims that included a fake signature from FINRA’s President.

Unfortunately, the fraudulent investment pitches being solicited to targeted investors are “advance-fee scams,” which involve enticing investors into sending money to cover administrative or regulatory charges associated with a buyback of stock shares that are virtually worthless or under-performing. Once an investor sends the money, he or she will never see it again; nor will he or she receive any of the money promised by the scammer from the stock buyback.  Generally, the financial scammer continues to keep in touch with the targeted investor only until the investor sends money.

However, investment pitches that are actually advance-fee scams have several indicators of the solicitation’s fraudulent nature.  First and foremost, FINRA does not and will never guarantee investments; nor do FINRA officers play a role in facilitating any investment opportunities. If the solicitation offers any sort of “guarantee” or “warranty” from FINRA, the investor should immediately be alerted to the likelihood that the solicitation is fraudulent.

Second, if the solicitation involves a letter correspondence, the investor should diligently seek to identify several telltale signs of fraud.  These signs may include the abundant use of quasi-legal language throughout the document, the repeated use of the word “guarantee,” and any grammatical or contextual errors, such as the incorrect name of “FinRa” or the reference to erroneous FINRA employment titles.

Third, in the case of telephone correspondence, investment pitches that are initiated by “cold calls” are a fair indicator of a fraudulent scheme being perpetrated.  Moreover, in these scams, the targeted investor is often asked to provide sensitive personal information, including a copy of their passport or social security card.

Finally, as an investor, it is important to conduct due diligence and independent research for the official number of the government agency, office, or employee and call to confirm its authenticity and legitimacy.  A simple internet search may quickly reveal that the scammer’s company name is associated with allegations of fraud.

If there is any suspicion that a solicitation is fraudulent or misleading, an investor should discontinue any communication with the solicitor and contact FINRA immediately; before any provision of personal information or money.  FINRA offers a “Scam Meter” tool to help investors assess whether an opportunity is legitimate.  FINRA also offers a “Risk Meter,” which determines if an investor has any characteristics and behavior traits that are known to be particularly vulnerable to investment fraud.