Texas is the latest state to issue guidance on how advisors should use wealthtech platforms to access employee retirement plans and other held-away accounts. 

However, the state’s guidance strikes a different tone for third-party providers than their counterparts in states such as Ohio and Missouri, which have also produced alerts.

The Texas State Securities Board issued the guidance on Wednesday, noting while advisors are more “likely to identify potentially useful technologies than their clients, they must do so in a manner consistent with their legal and regulatory obligations.”

Advisors will use these tools to access client data in accounts, including 401(k)s and banks, to better manage overall portfolio allocations. Still, other states have warned that these tools could violate state securities rules. In March, Ohio issued an “investment advisor alert” warning registrants about what it saw as the compliance pitfalls when using the platforms.

In an interview with WealthManagement.com, Texas Deputy Securities Commissioner Cristi Ramón Ochoa said the division ascertained the prevalence of these tools during standard advisor examinations and that other states’ guidance didn’t impact Texas’s approach. 

“We live in a world of emerging technology and AI, and it’s not our job to necessarily hinder innovation, but rather take a measured approach to regulating it,” Ochoa said. “So we thought it would be prudent to issue guidance and say ‘if you are going to use these platforms, that’s fine, but there’s got to be a checks and balances system on how to use them.’”

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The Texas guidance includes suggestions for due diligence, including understanding the agreements between advisors and the platforms and how the technology will be used. 

In the Ohio alert, securities regulators worried that “unregistered” third-party tools would use customer credentials to access held-away accounts without “the knowledge and consent” of custodians overseeing those assets. The Texas guidance asks advisors to understand how a client’s credentials are “stored securely” by the wealthtech platforms. 

Texas also decided disclosure was the correct method for meeting custody concerns, with the board recommending advisors disclose to clients “that these authorized third-parties may not have relationships with their clients’ custodians or recordkeepers, and any implications thereof.”

According to Ochoa, her department “scrubbed” the wealthtech platforms in question, reviewed custodian agreements and analyzed potential liabilities that could be waived to settle on the tips included in the guidance. She said she felt “extremely confident” about the advice and was ready to help advisors work responsibly with the tools.

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“That’s my role: to protect Texas investors,” she said. “And that’s also a way I can help bring our advisors into compliance without just penalizing them or prohibiting them from using any of this fintech that, honestly, we’re going to probably see a lot more of.”

Neither Ohio’s alert (nor a Missouri alert issued last year) named providers, but the technology described points to platforms like Yodlee, Morningstar’s ByAllAccounts and Pontera, a New York-based fintech firm helping advisors view clients’ workplace-sponsored accounts.

Pontera viewed the Texas guidance as an affirmation of their approach. Pontera Senior Director of Public Policy Ben White said it provided clarity for advisors and clients alike, finding that “in tone and substance,” the guidance supports advisors who want to use platforms like Pontera. 

White also noted the board’s acknowledgement of FINRA materials that describe “the risks associated with data aggregation and third-party tools,” and cited Delaware’s recent investor notice.

“Regulators play a critical role in supporting investors, and Texas took the right approach to incorporating innovation: understand the technology, analyze the benefits and risks, and help the market operate in a way that protects and supports investors,” White said.

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Pontera encrypts its login data, which clients give but are never shared with advisors. This year, it announced partnerships with Hightower and Orion and is one of the most prominent players in the space (although the firm was named in Washington state’s guidance about these tools issued in late 2023; regulators argued the firm’s processes ran afoul of cybersecurity mandates).