Today, Rhode Island Securities Division became the latest state to publish guidance supporting advisers' use of data aggregation and third-party platforms. This guidance is a part of the positive trend developing among state regulators who understand how data aggregation works and its important role in consumers’ financial security.
Like Texas, Rhode Island’s guidance puts control in the hands of investors, not custodians. Their guidance clarifies that advisers and clients don’t need approval from their client’s custodian to use third-party platforms. Instead, advisers can “disclose to their clients that these authorized third-parties may not have relationships with their clients’ custodians or recordkeepers, and any implications thereof.”
Rhode Island’s guidance mirrors Texas, which published its guidance in August. Both states also point to FINRA’s guidance on data aggregation. This shows consistency among states with different rules, policy objectives, and approaches to their respective markets – and also consistency across the state and federal levels. Clearly a positive trend is developing, and advisers should feel confident it will continue.
Crucially, Rhode Island and Texas have different approaches to advisers’ use of client credentials, and both support aggregation. Texas – like the SEC – allows advisers to take client credentials to manage held-away accounts; Rhode Island prohibits advisers from taking client credentials.
By permitting data aggregation, and acknowledging that data aggregators may operate using client credentials, Rhode Island has established several key facts:
- Advisers are not using client credentials or accessing client accounts when they use data aggregation.
- Third-party platforms with the appropriate security measures can actually protect investors against the risks associated with advisers holding their credentials, such as custody-related risks.
- Advisers can act as fiduciaries when they use data aggregation and third-party services.
Every state either prohibits advisers’ use of client passwords like Rhode Island or permits it like Texas. With these two states issuing parallel guidance, it’s clear that every state can support advisers’ use of data aggregation in the best interest of their clients, regardless of their rules on advisers’ password use.
Workplace retirement accounts play a critical role in Americans’ finances. For too long these accounts have gone under-served because they are “held-away” by a custodian their client did not choose, and cannot leave without quitting their job. Regulators like Rhode Island and Texas are charting a path where investors are in total control of their finances, regardless of who their employers choose to hold their retirement assets.
Pontera is committed to continuing the dialogue with regulators alongside our partners at the Financial Technology Association, Financial Data and Technology Association, and Financial Services Institute. We are proud to support advisers who work hard every day to make the American dream a reality, by maximizing their clients’ holistic finances and helping them achieve retirement security
