The Battle Over 401(k)s: Freedom vs. Captivity
An open letter from Yoav Zurel, Pontera CEO
For more than a year, Pontera and retirement savers have been fighting a battle. On one side, consumer choice — the freedom for Americans to choose who helps them and their families with one of their most important financial decisions: their plan for retirement. On the other, an entrenched institutional incumbent highly conflicted and motivated by their own economics. Until now, we’ve fought this battle quietly. That changes today.
We founded Pontera with a simple yet critical mission — to help millions of Americans retire better. America is a land of enormous opportunity, yet the reality is only 35% of non-retired U.S. adults believe their retirement savings are on track, according to the Federal Reserve. That’s why we remain unwavering in our focus: empowering individuals to retire with greater financial security by offering them something that is both simple and essential — the ability to choose how they shape their financial futures by securely connecting their own trusted financial advisors to their workplace retirement accounts.
If it sounds quite reasonable, it’s because it is. Unlike checking accounts, credit cards, taxable investments, IRAs, and other financial products, Americans do not get to choose their 401(k) provider. 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. Many recordkeepers, retirement plan advisors, and portfolio management platforms agree. That’s why Pontera has partnered with Manulife John Hancock, 401Go, Morningstar, BNY’s PershingX, Commonwealth Financial Network, Captrust, and other industry leaders.
There is one retirement incumbent, however, that does not seem to share this vision. 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. It also threatened to revoke all online access to accounts — retirement and otherwise — for customers who attempted to securely reconnect them. More than 24 million Americans have 401(k)s with Fidelity. What we’re seeing is an anticompetitive power grab — Fidelity compelling customers to use Fidelity advisors for customers’ own 401(k) accounts, or no advisors at all.
This has broad implications for retirement savers, whether they have a trusted financial advisor who uses Pontera or not. 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.
Read more from the New York Times: Fintech Start-Ups and Investment Firms Are Battling Over Your 401(k)
Plan Captives
Workplace retirement plans, such as 401(k)s, are selected by employers, not the participants themselves. Every year, tens of millions of savers end up with retirement plan providers they did not choose. That can create the economic motivation for one particular provider, Fidelity, to try to keep retirement savers locked under maximal institutional control for asset retention and the ability to offer in-plan advisory services, products, and proprietary financial tools and research. It’s like being forced to only shop at one grocery store — no matter the prices, selection, or quality of products — even if there’s a store that you prefer around the corner that already knows your preferences, meal plans, and dietary restrictions.
Plan participants are captives in Fidelity plans, lacking the ability to move their money elsewhere, as would happen in a competitive market. Fidelity has $16.4 trillion in assets under administration, a significant portion of which is workplace retirement plans. Are you really going to leave your job just so you can move your retirement account to a different provider?
We don’t believe consumers should be held captive for institutional economic interests. If you want to use your own financial advisor, one who doesn’t work for your 401(k) provider, you should be able to. It’s your money. We unapologetically stand for people’s right to choose how they get help with their family’s financial security. Fidelity does not appear to share those same values and is willing to leverage its massive market power to punish retirement savers — its own customers — operating under the guise of security to do so.
Pontera Means Added Security
Recordkeepers and thousands of registered financial advisors and financial institutions across the country have reviewed and approved Pontera’s security conventions. Credential-based aggregation, the method Pontera uses to connect accounts, is widely adopted and recognized across the financial industry; according to the Consumer Financial Protection Bureau, over 100 million Americans have connected their financial accounts to third-party tools. Perhaps most tellingly, Fidelity itself offers a credential-based aggregation service, both on its own websites and to non-Fidelity advisors, through its eMoney platform. These tools are not a blanket security issue and are widely accepted.
Advisors using Pontera do not — and cannot — see the participants’ credentials or access the participants’ accounts. Our technology is certified under SOC 2 Type II and ISO 27001, two of the industry’s key security standards. Our partnerships with leading organizations across the industry, who have independently assessed Pontera’s security infrastructure, further underscores this.
When Fidelity first publicly raised questions about data aggregation tools using credential sharing, we offered to work with them to leverage one of their APIs, or even to build a new one — an offer they summarily rejected while leveraging screen scraping technology themselves. A collaborative approach would have prevented disruption. Fidelity has never asked to review Pontera’s security practices despite Pontera’s repeated invitations to collaborate.
Savers Need Help
The real question isn’t about credential sharing. It’s about why clients want this service and willingly trust Pontera with their credentials in the first place: There is both need and demand for guidance and advice from a trusted advisor. In blocking the retirement savers’ digital access to their own accounts, Fidelity is choosing to hold captive one of their most valuable assets rather than offering the help and support consumers are asking for.
Fidelity’s Customer Protection Guarantee states, if a customer shares their account credentials with a third party, Fidelity will consider any activities by that third party as authorized by the customer. I’ll emphasize “third party” here, as this issue is not specific to Pontera; any advisor (and any retirement saver who wants help from their trusted advisor) that connects to a retirement account, with Pontera or otherwise, is considered authorized to do so if it’s client-permissioned. And Pontera offers protection for our advisors’ clients in the unlikely event there is an unauthorized activity in their accounts because of their advisor’s use of our platform. Our own Commitment to Client Protection is here for that very reason.
The retirement landscape is changing, and consumers are demanding holistic wealth management that incorporates their retirement assets to ensure the best financial outcomes for their families. Many financial advisors, recordkeepers, and retirement savers want to collaborate on providing secure and responsible management of accounts. Regulators at the state and federal levels have provided guidance on how consumers can use data aggregation tools. We actively work with policymakers, regulators, and industry organizations to provide responsible frameworks and regular updates to users.
We’re thrilled that so many industry stakeholders want to collaborate, because retirement savings should serve families — not institutions. We had hoped that Fidelity would be doing what’s best for retirement savers, as other custodians and recordkeepers have done, rather than engage in anticompetitive conduct that can harm retirement savers. We remain open to a dialogue with Fidelity on additional solutions that put savers’ interests first. But ultimately retirement savers should decide what’s best for them.
Pontera’s Commitment to Retirement Savers
We will always protect you and follow your lead. If you want your advisor to help you with your workplace retirement plan, we are here to help facilitate that. If Fidelity threatens to void your protections for any loss on Pontera, we are here to step in.
Retirement savers, you deserve better. You deserve choice, not captivity. Pontera will continue to stand with advisors, recordkeepers, custodians, and sponsors who put retirement savers first.
Sincerely,
Yoav Zurel
CEO
Pontera
