As a major investment company and financial technology (fintech) platforms fight over access to client retirement accounts, some customers caught in the middle are discovering that the “K” in 401(k) might just stand for “Keep out.”
The retirement rumble escalated recently when Fidelity began enforcing a new policy restricting access for third-party financial advisors, and clients learned they lost online access to their 401(k) accounts for enlisting outside help.
Among those locked out were users of Pontera, a popular investment management platform. Pontera allows financial advisors to access a client’s 401(k) account, like those held with Fidelity, through their platform while protecting the client’s personal login credentials. That way advisors can safely manage the account while being restrained by the platform from gaining control over actions such as transferring a client’s funds without authorization.
Back in September 2024, Fidelity released a statement expressing concerns about the dangers of “credential sharing … particularly when it enables third parties to take high-risk actions, such as executing trades within the accounts (1).” As a result, they warned that they would “prevent platforms reliant on credential sharing from accessing and taking action in customer accounts.” Now, customers who employed third-party platforms like Pontera are being locked out of their own Fidelity retirement accounts.
One example is Phoenix resident Kelly Havins, 63, who told The New York Times that he enlisted a Pontera financial advisor because, when it comes to managing his 401(k), he doesn’t “have the time or the understanding (2).” He said that when Fidelity contacted him to warn he could be locked out of his account, he “thought it was a scam.” But it wasn’t and, after some back and forth with Fidelity, he lost online access to his account. Havins said he had to work with his financial advisor to regain access.
For its part, a Fidelity spokesperson told InvestmentNews that they only block online access and that a direct call with a company rep will help customers restore it (3).
Still, financial advisor John Rathnam told news outlet Arizona’s Family that the idea that people “might get cut off from their largest savings account — that’s kind of crazy. That’s mind-boggling to me. I’ve got to believe that they could have handled it better than that (4).”
In an open letter posted to their website on Oct. 10, Pontera framed the situation as a “battle” between one side that stands for “consumer choice” and another that is “an entrenched institutional incumbent highly conflicted and motivated by their own economics (5).” They labelled Fidelity’s actions an “an anticompetitive power grab,” accusing them of compelling clients to use their own in-house financial advisors. As well, they classified those same clients as “captives … lacking the ability to move their money elsewhere” as a 401(k) is tied to an employer, and it’s the latter who decides what investment company they use.
A Fidelity spokesperson told USA Today they do in fact “work closely to support” independent Registered Investment Advisors (RIAs) who “securely advise on employer-sponsored retirement accounts with plan sponsor oversight (6).”
Brenden Gebben, CEO of Absolute Capital, also spoke with USA Today and said that his company has an agreement with Fidelity to advise on behalf of their clients, adding that “We are a regulated entity” and noted Pontera is unregulated from a financial perspective.
Meanwhile, financial planner Ben Henry-Moreland said in an interview with InvestmentNews that Pontera and similar third-party platforms “use ‘screen scraping’ technology that gives them access to a lot more client information than what’s needed for the tool to perform its function (7).” He warned that such data could potentially be sold without the client’s permission, but did say that “it’s frustrating that Fidelity, if reporting is true, hasn’t worked with Pontera” to create a more secure connection between them.
To that end, Pontera told The New York Times that they tried to work with Fidelity to customize secure access to customer investment accounts, but didn’t hear back.
The ongoing struggle between Fidelity and Pontera does raise the point that many Americans would prefer to choose their own financial advisor when it comes to handling their 401(k) accounts.
The advantages of a financial advisor are clear: personalized advice based solely on your own needs and desires, as well as a trusted professional to answer questions, explain your investment options and warn of impending risk you might not see coming.
That said, as Kiplinger notes, financial advisors have to get paid, too, and they “typically charge an annual fee based on a percentage of the assets they manage,” often somewhere between 0.5% and 1.5% (8). Still, the outlet adds that “the personalized advice and improved performance they can provide may outweigh the cost of their fees over time.”
It’s also a good idea to weigh your need for an advisor. Ask yourself, are your account management needs complicated enough to necessitate outside help? If so, make sure to enlist a fiduciary investment advisor to look out for your financial needs. Fiduciaries, by law, must act solely in your own best interest when managing your accounts.
Forbes notes that an advisor can take multiple separate accounts and employ “a portfolio-based approach [that] focuses on achieving the target asset mix when all accounts are combined (9).” The publication adds your 401(k) may also need to be rebalanced regularly to ensure it’s working toward your retirement goals.
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Fidelity Investments (1); The New York Times (2); InvestmentNews (3, 7); Arizona’s Family (4); Pontera (5); USA Today (6); Kiplinger (8); Forbes (9)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
