The 401(k) industry is heading toward a major conflict over who can access and use participant data. Record keepers and advisors both depend on this data to cross-sell wealth services—an increasingly critical revenue source as plan fees continue to decline. Recent actions by firms like Schwab and Fidelity to limit third-party access signal a growing effort to control high-value participant assets.
Delivering wealth services requires technology, advisors, guidance systems, and—most importantly—data. But access isn’t straightforward. Data carries real costs and creates significant privacy and fiduciary considerations, especially since plan sponsors and many advisors are fiduciaries while most providers are not. Participants often don’t understand these distinctions.
While participants own their data, plan sponsors must protect them due to inertia and lack of engagement. Record keepers should have controlled access with plan sponsor permission, and advisors should only access data if they can provide high-quality service. Limiting data simply to block competition is viewed as harmful.
Ultimately, both advisors and record keepers need participant data to compete, and the struggle over who controls that data is intensifying as the industry continues to merge retirement and wealth services.
Read more insights in Fred Barstein’s latest article, “Day of Reckoning Coming Over 401(k) Participant Data.“
