Pontera cries 'anticompetitive,' Fidelity cites cyber safety in credential sharing standoff

A long-running conflict between fintech firm Pontera and Fidelity has spilled out into the open in explosive fashion, with Pontera's CEO calling out the retirement plan giant's efforts to restrict third-party access to customer's 401(k) accounts as an "anticompetitive" move against outside advisors.

But Fidelity has denied those claims, citing the need to protect customers and emphasizing the importance of "safe practices."

How the 401(k) feud started

The root of the conflict can be traced as far back as September last year, when Fidelity announced it would "begin taking steps to prevent platforms reliant on credential sharing from accessing and taking action in customer accounts held at Fidelity." At the time, the firm said it was acting "with customers’ best interests in mind to enhance security and reduce customer data exposure.

"Some third-party fintech firms use credential sharing (e.g., username and password) to access, manage, and trade within their clients’ employer-sponsored retirement accounts, including those held at Fidelity, without plan sponsor oversight," the announcement read.

Following that announcement, Pontera, which enables investors who share their 401(k) login data to work with the advisor of their choice, told InvestmentNews it was "committed to helping Americans make the most of their retirement savings."

Pontera's platform acts as a secure bridgeway between independent advisors and their clients' held-away 401(k) assets, effectively letting advisors manage those accounts without directly having the associated credentials. At the time, the fintech encouraged its partner advisors and firms to mount a collective call for Fidelity "to explore collaboration."

Meanwhile, Fidelity's announcement said it expected the change to be "minimally disruptive to clients," though "they may need to communicate with any outside advisor with whom they work to ensure account transactions are managed as intended."

Pontera speaks out

Fast-forward to last Friday, when a report by the New York Times detailed how some investors with Fidelity were reportedly shaken after being temporarily locked out of their retirement accounts. In at least one case, the 401(k) giant had sent an email telling investors who shared their logins with an outside provider to contact the company and reset their credentials, or risk being barred from online access to his 401(k). 

Also on Friday, Pontera published a no-holds barred open letter by its CEO Yoav Zurel, calling out Fidelity for "locking out tens of thousands of its own customers from their accounts." That "anticompetitive conduct," Zurel said, was aimed at investors who "[chose] to work with financial advisors outside of Fidelity's ecosystem."

In an interview with InvestmentNews, Zurel emphasized the importance of holistic service among fiduciary advisors.

"They want to make sure they can guide and provide advice taking all of customers' accounts no matter where they're held," he said. "And in their view, 401(k) providers should also be fiduciaries and should also care about good quality advice."

Zurel argued that locking users out from their accounts for sharing their credentials – "a practice that has been in place for more than 15 years in the industry" – is a disproportionate response with dire consequences for investors' financial security. 

"If you lose access to your money, how are you supposed to know if it's okay? How are you supposed to take care of it?" he said. 

As a retirement planning giant with more than 24 million participants across its 401(k) plans, Zurel argues Fidelity holds an "assymetry of power" over investors, as it's not easy for them to walk away from an employer-sponsored plan. That leverage, he believes, has emboldened Fidelity to limit its users' freedoms under the guise of protecting their safety.

"We have a partnership with 401GO, which is a much smaller competitor to Fidelity. That entire partnership is all API-based," Zurel said. "If Fidelity wants to do that, we're open to it ... It's really up to them. [But] they're not answering our phone calls [or suggestions for] different solutions that we've provided them."

Fidelity's side

A spokesperson for Fidelity said Pontera's claim of anticompetitive behavior lacks merit, noting that a customer is free to work with "[outside] solutions and advisors that leverage safe practices.

"Fidelity’s concerns are focused on how some advisors are gaining such access by using customer credentials," the spokesperson said in an email to InvestmentNews. "We work closely to support many RIAs who securely advise on employer-sponsored retirement accounts with plan sponsor oversight."

According to the spokesperson, many plan participants who've been impacted by the restrictions on credential sharing have provided feedback, saying "they were unaware that they had shared their credentials." 

The spokesperson also emphasized the limited nature of its blocks on 401(k) account access, as customers can lift those by calling Fidelity to put new credentials in place.

"Moreover, the blocks affect digital access only," they said. "Customers can always access information and transact in their accounts by calling a Fidelity phone representative."

Fidelity's broad presence in the 401(k) space, which Zurel and others may see as a source of power, also creates an outsized burden of responsibility. Because customers' digital credentials open access to Fidelity's full ecosystem, sharing them with a third party gives that person or entity access to accounts beyond their 401(k) at Fidelity. 

When asked by InvestmentNews about Pontera's invitations to collaborate on an API, a person close to the matter confirmed that Fidelity has met with Pontera multiple times, and the latter is well aware of Fidelity's concerns over attempts to access customers' data without its consent.

"We can confirm that the fintechs created their business models and service offerings without consulting with Fidelity," the firm spokesperson said. "Similarly, financial advisors that have chosen to work with them have done so independent of their relationship with Fidelity."