More than a year ago, Fidelity announced that it would move to restrict access for certain third-party advisor technology providers reliant on credential sharing from accessing and taking action in customer accounts held on its platform.
At the time, Fidelity said that credential sharing presents security risks to its customers, particularly when it enables third parties to take “high-risk actions,” such as executing trades within the accounts.
"This change is with customers' best interests in mind to enhance security and reduce customer data exposure. We anticipate these changes will be minimally disruptive to participants," it stated.
Among the firms expected to be most adversely affected was Pontera, a technology platform provider that allows financial advisors to manage and rebalance clients’ held-away retirement accounts, such as 401(k)s and 403(b)s, from a central dashboard. Reporting at the time suggested that Fidelity's decision surprised Pontera and its peers.
As noted at the time, advisors who use Pontera serve clients with trillions of dollars in custody on the Fidelity platform.
Now, Pontera has taken what it describes as a quiet effort to persuade Fidelity to change course into the open with the publication of an open letter that paints the dispute as a matter of “consumer choice” versus “an entrenched institutional incumbent highly conflicted and motivated by their own economics.”
The letter was written by Pontera CEO Yoav Zurel, who wrote that, “unlike checking accounts, credit cards, taxable investments, IRAs, and other financial products, Americans do not get to choose their 401(k) provider.” At its base, Zurel suggested, Fidelity’s move is about “compelling customers to use Fidelity advisors for customers’ own 401(k) accounts, or no advisors at all.”
In a statement shared with ThinkAdvisor, a Fidelity spokesperson contested that characterization.
"If a customer chooses to work with an advisor to manage their 401(k), they can do so, as there are solutions and advisors available that leverage safe practices," they said. "Fidelity’s concerns are focused on how some advisors are gaining such access by using customer credentials. We work closely to support many [registered investment advisors] who securely advise on employer-sponsored retirement accounts with plan sponsor oversight."
The spokesperson also said Fidelity stands by its statements made last year, in which the firm painted the move as “the latest step” in a continuing effort to safeguard customer data and privacy. In late 2023, the earlier statement pointed out, Fidelity took a related step to address data sharing by working toward eliminating screen scraping on its platform. Such moves are about security, the firm maintains, not about hamstringing any competitors.
Zurel's letter suggests that description is problematic, arguing that retirement plan account owners whose employers elect Fidelity as recordkeeper now lack the ability to connect their outside advisors to their Fidelity accounts. Again, Fidelity contests this assertion.
“Personalized advice and management from a participant-chosen advisor helps counter that lack of choice; it allows for holistic planning, tax optimization strategies, and navigation of investment products both simple and complex,” Zurel wrote.
According to Zurel, many recordkeepers, retirement plan advisors and portfolio management platforms work with Pontera to deliver on that vision, including the likes of Manulife John Hancock, 401Go, Morningstar, BNY’s PershingX, Orion, Commonwealth Financial Network and Captrust.
“There is one retirement incumbent, however, that does not seem to share this vision,” Zurel wrote. “On September 5th, National 401(k) Day, Fidelity began locking out tens of thousands of its own customers from their accounts for choosing to work with financial advisors outside of Fidelity’s ecosystem — advisors who are registered fiduciaries acting in their clients’ best interests.”
Zurel said that Fidelity also threatened to revoke all online access to accounts, “retirement and otherwise,” for customers who attempted to securely reconnect them.
“This has broad implications for retirement savers, whether they have a trusted financial advisor who uses Pontera or not,” Zurel said. “Anyone who authorizes a third party — a spouse, an attorney, a trustee — to manage, share, view, or otherwise support them in their financial journey is now at risk of being locked out of their own assets if those assets are with Fidelity.”
In general, Fidelity customers can lift account blocks by calling Fidelity and putting new credentials in place. Moreover, the blocks affect digital access only, and customers can access information and transact in their accounts by calling a Fidelity phone representative.
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