Young digital-first firms hoping to revolutionize the way advisers manage client finances and build their wealth claim they have run into resistance from major banks opposed to sharing financial data.
A heated industry debate has evolved, hinging on Section 1033 of the Dodd-Frank Act, which grants customers a right to access their personal financial data. Fintech firms argue that blocking access to such data also unfairly hinders their growth, while banking advocates call screen scraping, a common data gathering method, unsecure.
So digital wealth management firms, personal finance management app developers and aggregators took a page from the traditional business playbook and earlier this year formed their own lobbying group, called Consumer Financial Data Rights, claiming advisers will be impacted in their ability to plan for clients without data access.
"It is an old-school tactic, but we've got to operate within the system to have our voice heard in debates like these," says Seth Rosenbloom, associate general counsel at Betterment, which is part of the group.
"The larger institutions have substantially more resources at their disposal. If a group of us fintech companies are all advocating for the same thing, the most logical move was for us to work together."
So far digital wealth management firms' political advocacy has been limited to solo efforts, such as Betterment's national advertisements addressing President Trump on the Department of Labor's fiduciary rule.
But concerns of data access being rolled back if Dodd-Frank is repealed by the Trump administration have earned CFDR support from the breadth of fintech firms, including those that work with industry incumbents.
One of the key firms organizing the CFDR is the data aggregation and intelligence provider Envestnet-Yodlee.
"The group was formed following interest from several regulatory agencies on the question of consumers’ ability to access and share their own financial data," says Steve Boms, vice president, government affairs at Envestnet-Yodlee. "We believe that innovation is a politically neutral ideology."
Banks in the past have been accused of blocking personal finance apps providers like Mint from accessing their customers' account information. They deny they are against sharing information.
“We’re not interested in limiting access to the data,” Brett Pitts, head of digital for Wells Fargo Virtual Channels, tells American Banker.
“I think a lot of those statements are based on the premise or assumption that we’re somehow fearful of these arrangements," Pitts said. "We’re not concerned about being disintermediated from relationships with our customers, we’re not concerned about customers’ sharing information they want to share. The control point that’s important to us is that all of this remains under customer control.”
For all banks, the screen-scraping process many fintech firms rely on — wherein customers grant third parties access to their credentials so they can import account information into programs — is fraught with potential security hazards.
"Both sides have progressively become more vocal in the debate," Rosenbloom acknowledged. "Combined with the discussions around Dodd-Frank, we knew that policy work would be absolutely required."
Boms, however, avoids focusing on any one institution.
"There are multiple stakeholders in this conversation including regulators, Congress, consumer advocacy groups, financial institutions, the fintech ecosystem, aggregators, and more," he says. "Ultimately, the CFDR group desires a solution that will deliver better financial outcomes for consumers."
Those supporting the CFDR's efforts say the lobbying group is necessary, especially in the current political environment.
"With talk of the repeal of Dodd-Frank, no pun intended, there is risk that new walls will be created that separate the consumer from their data and potentially slows innovation in the financial services industry," says Rob Foregger, co-founder of the enterprise digital advice provider NextCapital.
Despite fintech firms' new lobbying efforts, they are dependent on the banks' willingness to enable access, notes Bill Winterberg, founder of the wealth management industry blog FPPad.com.
"Ultimately, I believe it'll take the support of millions of customers to demand that the banks keep access to their account data open," Winterberg says.
The industry may be able to avoid further politicking and formulate its own solution, as banks announce data sharing agreements with individual aggregators.
The CFDR says it will continue promoting data sharing through open application program interfaces.
"Nobody likes screen scraping, but we do it to get the data that is important for a financial planner to do a good job with holistic planning for their client," says eMoney Advisor CEO Ed O'Brien, who notes his firm aggregates data for over 46,000 customers.
"It is the least elegant way to get data out there in the industry. Our preferred way is to get data from enterprises and advisers with quality data feeds. As the industry evolves to better and more secure APIs, it's tough to argue that’s not a good thing for the industry."