Like many people my age, I have serious doubts about the long-term viability of Social Security and whether I’ll ever get a check once I hang up the proverbial hard hat. I have a ways to go, but I do think about it often. Time flies.
Government projections aside, the only reasonable path most of us have to fully fund our golden retirement years (apart from early purchases of Bitcoin) will be tax-advantaged investing accounts. There are several to choose from, including HSAs, IRAs, 401ks, 529 plans, and a few others. But when it comes to FinTech innovations for those accounts and services to help people fund their retirement, too many state regulators are closing doors on new tech tools, depriving consumers of choice in preparing for retirement.
In Oregon, Washington, and even Missouri, state securities regulators have sent warning letters to their residents, castigating firms that grant investors additional options for investing their hard-earned money beyond traditional retail banks and brokerages. Companies like Pontera, RetireUS, and Robinhood are creating new tools to give an edge to those who use custodial retirement accounts. They offer AI-powered robo-investing and investment strategies that are flexible and deliver good returns.
Especially for workers with employer-controlled retirement accounts, these tools grant users more flexibility to choose funds and plans, avoiding costly management fees forced on customers without much choice.
Traditional retirement plans created by employers for their employees often include administrative fees charged on a monthly or yearly basis by an outside financial provider, tacking on additional “advisory” fees for their suite of products. These plans are pre-determined and rarely customizable.
One upstart, Pontera, allows investors to integrate different kinds of portfolios and accounts on a single platform. This enables more succinct and accurate financial guidance from advisers of their choice. Secure digital connections provided between accounts and platforms also allow users to sync up-to-date account information, like money management software like Rocket Money and CreditKarma.
Maybe it’s the millennial in me, but I really do demand this kind of technologically savvy approach to finance, as well as flexibility.
Investors should be able to fine-tune their risk tolerance and investments based on their unique situation, something that is often impossible with large-scale retirement services contracted by large corporations for their employees.
To more conservative-minded financial regulators, many of these innovations are too novel to be taken seriously. If they are taken seriously, it’s to warn residents that they’re likely to get duped.
That’s what Washington State said in 2023 when it informed its residents that using platforms like Pontera would “violate” state regulations. The North American Securities Administrators Association, which represents state securities regulators, has gone so far as to label these new companies “unethical” for how they integrate credentials and use the technology.
But they’re wrong.
What these regulators don’t understand is that these platforms use the latest encryption software to securely give investors more choice in how they view their balances and make important retirement investing decisions. The user-fed information allows investors to tailor their wishes regardless of where their account is hosted or where their money is managed.
End-to-end encryption is the standard for my generation’s communications as much as it is the standard for how we visit websites and share data online. Using this tech makes squirreling money away for retirement more attractive.
This is precisely the kind of innovation that millennials in their prime working years crave, but one that incumbents fear.
Rather than warning consumers away from these novel finance products and opportunities, state regulators should be inviting them into their states and learning from their experiences, as they have done with crypto entrepreneurs in states like Wyoming and Texas. Consumers deserve a regulatory environment that empowers them while also inviting market competition to better serve them. Where the rules don’t fit the technology, then we need an upgrade.
When regulators entertain incumbent companies’ complaints without engaging innovators like Pontera or Robinhood, they risk becoming unwitting allies to Big Finance’s quest to moat their empire of $12 trillion in active workplace retirement plans.
Investors want access to the latest and greatest tech tools to build their future nest eggs. All regulators have to do is get out of the way.
Yaël Ossowski is the deputy director at the Consumer Choice Center
This article was originally published at www.thecentersquare.com
