Missouri recently brought the MC Hammer down on financial advisors, telling them, “U Can’t Touch This.”
The Show-Me State moved last month to prohibit financial advisors from using credential-sharing technology to manage clients’ held-away 401(k) assets, making it the first state to formally restrict the practice. Advisors can still use the technology to review client information, but they cannot use it to place trades or rebalance accounts. The rule is scheduled to take effect at the end of December.
What was once a dispute between financial services firms and technology providers is now a regulatory issue, raising questions about whether other states will follow Missouri’s lead. The measure could make it more difficult for advisors to provide comprehensive advice on clients’ 401(k)s. But there is an understandable argument for investor security, said Jania Stout, president of retirement and wellness at Prime Capital Financial, noting that she hopes the controversy leads to better ways for advisors to manage workplace retirement accounts.
“I could see other states following suit. But even if they don’t, it’s already getting harder and harder to use credential-sharing tools,” she said, adding that recordkeepers regularly contact customers to warn them against using the tools and require them to update their passwords every couple of months.
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