Fintech firm Plaid explained that funding a new financial account should be a frictionless process, where account information is verified “instantly” and transfers are initiated quickly.
Financial infrastructure Fintech company Plaid also noted that moving cash balances may be fairly straightforward, transferring investment holdings to a new account continues to be a “cumbersome and manual process.”
Plaid is announcing Investments Move, which is described as a new product to help change that.
Currently being used by modern brokerages like Robinhood, Frec, as well as Public, Investments Move reportedly employs Plaid’s account linking experience that more than 100M consumers are familiar with.
As stated in the update from Plaid, it captures the data needed to move investments from one account to another—without “selling securities and incurring taxes.”
The update from Plaid also mentioned that it may be used when opening a new brokerage account, “transferring IRAs, or even switching to a new wealth manager.”
Investments Move streamlines the data collection process for the Automated Account Clearing and Transfer Service (ACATS), which is reportedly “how US investments are moved without being converted to cash.”
ACATS currently requires users to “manually enter information” such as account numbers, institution details, account types, and more.
For partial transfers, users also have to “manually indicate positions and quantities.”
Just like manual bank account authentication was back in 2013, this process is now said to be “ripe for automation.”
Using Plaid to connect accounts and retrieve information for an ACATS transfer “eliminates the need for manual data entry.”
Users no longer have to download various brokerage statements and type information into a form.
With Plaid, they are now able to gather the required information in order to initiate the transfer in just a few clicks.
Based on conversations with our customers, “30-50% of ACATS transfers get rejected.”
This is because of the errors that tend to come from “manual data” collection processes.
Issues such as account name mismatch, account type mismatch (e.g., IRA vs brokerage), or account numbers “not matching are common.”
Also, not all brokerages support the same kind of assets, so there “can be unsupported holdings issues as well.”
Better and faster data can reduce ACATS rejection rates.
By providing source-of-truth data from brokerages on both sides of a transaction, Investments Move allows companies to “take action to stop rejections before they happen.”
High rejection rates create more customer support “inquiries and a high burden for support teams.”
With the decreased rejections due to Investments Move, customers are spending fewer operational hours “processing transfer errors and resolving support tickets.”
The reduced rejection rate means more account transfers are “completed successfully.”
This higher success rate leads to more assets under management (AUM) over time as more new customers “successfully fund their accounts.”
Investments Move retrieves data from the “highest quality” source: the brokerages themselves.
That means when a user wants to transfer funds to their new brokerage account, we ensure that you have “the most complete and accurate data for initiating an ACATS transfer—while minimizing manual steps in this process.”
Account funding for new brokerage accounts involves two separate processes which includes “adding cash and adding existing investment holdings.”
Instead of creating two separate account funding experiences, Investments Move enables firms to give clients the same “superior experience” for both via Plaid Link.