Missouri is the latest state to warn advisers about using popular wealth technology platforms that access client assets held in accounts such as 401(k) plans and banks.
In a letter sent to more than 40 state-registered advisers, the Missouri Division of Securities said the use of the tools, which rely on client login credentials to access accounts with their permission, “is considered dishonest and unethical “.
The letter referred to technology in which the adviser accesses client accounts held in employer-sponsored retirement plans or “other savings, bank or brokerage accounts” without “the knowledge or approval of the institution or plan administrator responsible” for that account . The practice raises issues about safeguarding assets and advisers' 'fiduciary duty'.
Madison Walker, communications and public affairs specialist for the Missouri Secretary of State's Office, said the Securities Division sent the notice on May 23 to about 45 firms in the state that either use the tools, have used them in the past or have asked the state about them at some point. He said the topic first came to the attention of Missouri regulators from discussions held last year among members of the Securities Administrators Association of North America. Fred Baldassaro, director of communications for NASAA, said the group could not comment on individual state actions.
Access to data in client accounts held outside the financial advisor's custodian or brokerage firm helps advisors create more complete overall financial plans. Firms that use customer login data, with permission, and would likely fall under the Missouri warning include Envesnet's Yodlee, Morningstar's ByAllAccounts, AllData from Fiserv (formerly CashEdge) and Pontera, used by many firms to access in a client's workplace retirement plan records.
Pontera was the named target of a similar warning letter sent to advisers in Washington by that state's securities regulators, after CityWire first reported in December 2023 and again in February.
A Pontera spokesperson said there is confusion over how the tools work. While the app uses client-provided login credentials to give advisors access to accounts, the data is secured and encrypted and not actually shared with the financial advisor.
“This memo challenges all of the credential-based technologies that state-registered advisors in Missouri currently use for account collection, budgeting and scheduling, all of which enable full service and holistic fiduciary service to clients,” said Joseph A .Giannone, director of Pontera. communications.
“We are finding that there is confusion among certain states about how many of these credential-based, client-permitted technologies work, and so we are in active dialogue with regulators seeking clarity,” he said. “Many states that allow state-registered advisors to manage client accounts held elsewhere through credential sharing view Pontera favorably as a way to ensure that advisors do not have access to client credentials or accounts of customers and cannot take possession, control or withdraw funds.”
Mark Kissler, chief of licensing and examinations for the Washington State Department of Financial Institutions Securities Division, said about 10 advisers in that state had been sent a letter telling them to stop using the app and that the issue was an “ongoing conversation”. with other state securities regulators.
“Other states are looking at this and need to follow the same path to understand what this is and how it applies to them and their regulations,” he said. “It's coming more and more.”
(Edit: This article has been edited to clarify the firms that may be affected by the state's actions.)