Morningstar Magazine - February/March 2018 - 17

Of course, there are legitimate liability and
security concerns, as well as the need for common
standards for data aggregation, which is why
we think regulators need to act to set up a system
that works for everyone.

The Consumer Financial Protection Bureau has
authority from the Dodd-Frank Wall Street
Reform and Consumer Protection Act to issue
regulations to help consumers share their
financial data with aggregators, but to date, the
bureau has only released a nonbinding,
high-level principles document that encourages
the financial institutions under its jurisdiction
to allow customers to share access to their
financial data. This document is a step in the right
direction, but it is not a final regulation that
would compel financial institutions to ensure
ordinary people have an unfettered access to their
own data. Further, the CFPB does not have
any authority over noncovered financial institutions,
which include many financial institutions that
manage retirement accounts.

To correct this state of affairs, we need to
update our vague and outdated laws
and regulations on financial data transparency
and data ownership.

Other major bank regulators-the Office
of the Comptroller of the Currency, the Federal
Deposit Insurance Corporation, and the
Federal Reserve System-have generally focused

abruptly cut data feeds, leaving consumers who
rely on fintech applications in the dark about
their finances.
Financial institutions argue that there
are privacy concerns with allowing third parties
to have access to their clients' data. We
believe that investors own their data, including
information about their investment options,
and should be able to choose to share it with third
parties as they wish.

Financial institutions argue that there are privacy
concerns with allowing third parties to
have access to their clients' data. We believe
that investors own their data and should
be able to choose to share it with third parties
as they wish.

Deeply Fragmented Regulatory Landscape

Right now, seven major federal regulators
in the United States have authority over the broad
world of data aggregation and fintech.
These regulators have authority over different
kinds of financial institutions, and they
also view the challenges with data aggregation
very differently, leading to a fragmented
regulatory environment.

Finally, the Department of Labor and the
U.S. Treasury have the authority to regulate the
recordkeepers that run retirement plans.
Under Dodd-Frank, they could voluntarily cede
authority to the CFPB if they chose to, but agencies
are loath to give up their turf. Still, the Department of Labor has broad authority to compel
recordkeepers to disclose information, including in
electronic form, and could probably require
recordkeepers to allow retirement savers to share
their data. However, the department has taken
no steps to do so. Unfortunately, American
workers' largest asset (outside of housing) is
retirement accounts, and workers have no choice
of the recordkeeper for their 401(k) because
their employer sets up the plan. For those reasons,
it is critical that the Department of Labor affirm
that retirement savers own their financial data and
can share it with third parties.
Interagency Coordination Is Needed

Ensuring that individual investors can make
full use of all that fintech has to offer will require
federal regulators to coordinate with each
other and with the industry. Other countries such
as the United Kingdom have already adopted
common standards for sharing data, common
security protocols, and clear rules for dividing up
liability. Although this sounds like an esoteric
issue, we believe it is critical for helping ordinary
people-faced with the burden of saving
and investing for retirement-make sense of their
assets, giving them the best chance to enjoy
a successful retirement. K
Aron Szapiro is director of policy research with Morningstar.

on examining cybersecurity practices at financial
institutions and third-party aggregators
rather than promoting a common standard
to make it easier for fintech to operate. In October
2016, they began the regulatory process of
enhancing those standards but have not taken
further action. Some of their proposals actually
might lead to a reduction in data aggregation and,
thus, fintech innovation.

global.morningstar.com/Morningstarmagazine

17


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Table of Contents for the Digital Edition of Morningstar Magazine - February/March 2018

Contents
Morningstar Magazine - February/March 2018 - Cover1
Morningstar Magazine - February/March 2018 - Cover2
Morningstar Magazine - February/March 2018 - 1
Morningstar Magazine - February/March 2018 - 2
Morningstar Magazine - February/March 2018 - Contents
Morningstar Magazine - February/March 2018 - 4
Morningstar Magazine - February/March 2018 - 5
Morningstar Magazine - February/March 2018 - 6
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Morningstar Magazine - February/March 2018 - 8
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