Missouri State Regulators Issue Advisories to Wealth Advisors

Missouri state regulators have been issuing advisories to wealth advisors concerning the usage of financial technology applications that facilitate access to client accounts outside their direct oversight.

These applications, including Pontera and Envestnet’s Yodlee, are employed by advisors to consolidate and analyze clients’ financial data across various institutions.

In a recent communication, the Missouri Securities Division notified approximately 45 advisory firms that such collaborations with third-party vendors might pose regulatory concerns. The letter highlighted that any advisor, or their representative, accessing a client’s external account using the client’s credentials, even with permission, without informing the respective institution or administrator, is deemed unethical and dishonest.

This warning was issued on May 23, as confirmed by Madison Walker, spokesperson for the Missouri Secretary of State’s office. It specifically pointed out risks associated with credential-based systems that allow advisors access to accounts such as 401(k)s, brokerage, and banking accounts outside their custodial purview.

The regulatory body also raised potential issues regarding custody, record-keeping, and client privacy due to the use of these tools. Missouri’s directive urged advisors to meticulously evaluate all third-party engagements to avoid circumventing laws and regulations indirectly which they cannot override directly.

Although the advisory did not name specific vendors, it described services central to companies like Pontera, Envestnet, and Morningstar's ByAllAccounts. Joe Giannone, a spokesman for Pontera, clarified that their service enables advisors to only rebalance clients’ assets in workplace retirement plans with explicit client consent, without permitting any further access or control over the accounts.

Historically, managing clients’ retirement plans was challenging. Advisors could either suggest adjustments that clients might ignore or gain direct access through clients’ credentials to make changes—an approach fraught with problems, according to Giannone.

Morningstar declined to comment on the matter, while Envestnet did not respond immediately. Giannone expressed concern that Missouri’s stance might stem from a misunderstanding of how technologies like Pontera function. He indicated a willingness to engage with policymakers to clarify the operational nature of these technologies and their role in providing comprehensive, fiduciary advice aimed at enhancing client outcomes, emphasizing that many states endorse such client-permissioned, credential-based technologies for holistic advisory purposes.


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