Fraud has surged as cybercriminals have developed new technologies and tactics. Wealth management clients have become prime targets—in large part because they have more to lose. Even though high-net-worth individuals may be at higher risk from fraud, they also have a powerful resource to help protect them: their financial advisor.
As Tracy Goldberg, Director of Cybersecurity at Javelin Strategy & Research, detailed in The Understated Cyber Vulnerabilities of Wealth Management Clients report, wealth managers must consider particular variables when developing strategies to safeguard their clients. Creating these defenses is critical for financial advisors, not just to protect clients but also to build relationships that can span generations.
Considering the Whole Household
The fraud landscape has shifted dramatically in recent years amid the emergence of technologies like artificial intelligence. AI-powered tools have made it harder to discern fraud attempts from legitimate communications, and bad actors increasingly utilize phishing attacks that impersonate major companies like Amazon or PayPal.
Along with more convincing messages, cybercriminals can glean more data about their targets from the internet because individuals often post detailed information about themselves online. Armed with this knowledge, bad actors can send timely and crafted messages to potential victims, such as emails or texts purporting to be from a friend or relative.
What’s more, it is often not simply the wealth management client who is the target. Increasingly, cybercriminals are casting a net wide enough to include their families.
“One thing that stands out about wealth management clients from our survey that I think is surprising is that among the majority of wealth advisors that we surveyed, most of their clients have children under the age of 18 living in their house,” Goldberg said. “That raised a big flag for us, because we know from separate research that we do at Javelin that households that have children under the age of 18—by default—are at greater risk of being targeted by a social engineering attacks, such as a scam.”
Social engineering techniques, whereby bad actors manipulate their targets to goad them into compliance, have become a fixture of fraud attacks across the board. However, children can be especially vulnerable because they are typically more comfortable with interacting online and sharing personal data.
Children are also more likely to be present on social media platforms like YouTube or Instagram and be active in online gaming communities like Fortnite.
“It’s just simply that children are more likely to be targeted,” Goldberg said. “Children post a lot about themselves on social media. They’re more likely to interact with people they don’t know in real life. The prevalence and the use of online gaming platforms put them at risk. And if you have a child in the house who has been victimized, you’re more likely to have another adult or even child in the house victimized.”
In addition to children, wealth managers should consider that seniors are a top target for cybercriminals. Many elderly adults use social media and e-commerce platforms but may not be as equipped to identify threats or resist social engineering tactics as younger adults are.
Because more adults are caring for elderly parents or relatives, wealth managers must consider their clients’ whole households.
Protecting Identities and Accounts
Although wealth management clients may not face threats that are significantly different from those being deployed against consumers generally, they have an extra layer of protection in their financial advisor.
However, cybersecurity has sometimes been a blind spot for family offices. Many advisors may have developed robust strategies to protect their clients from medical or property emergencies without considering that a cyberattack can be just as damaging.
“This offers a unique opportunity for wealth advisors to build on the long-term relationships that they already have with their clients and to be there as a resource to provide their clients with guidance about cybersecurity best practices,” Goldberg said. “How can they protect themselves if they feel that they could be victimized by a scam? Most importantly, if they are victimized by a scam, knowing that they could turn to their wealth advisor for help.”
One of the most important steps wealth managers can take is to stay on top of fraud trends and educate their clients accordingly. Bad actors are constantly shifting their techniques to find vulnerabilities they can exploit. Additionally, financial advisors should detail the actions clients should take if they feel they have been compromised.
Beyond education, an ever-growing array of software tools can help wealth managers keep their clients’ data safe.
“One of the things that we highly recommend in the report is that wealth advisors offer white-labeled identity theft protection services to their clients,” Goldberg said. “This would be the wealth advisor partnering with a company that offers identity theft protection and then taking that identity theft protection and packaging it and white-labeling it.
“It’s putting your brand on it, but then selling it at a discounted rate or maybe even offering it free of charge to your high-wealth or high-value clients, because when their identities are protected, their accounts are protected. It just helps to reduce the risk of fraud.”
Building Relationships Through Cybersecurity
Like all consumers, wealth management customers are increasingly concerned about the rising fraud threat, and many are unsure about how to protect themselves.
Providing cybersecurity education and developing a prevention plan can substantially strengthen the relationships between advisors and clients. Once this trust is established, it can create relationships that can last for generations.
“As we’re looking at generational wealth, the more that wealth advisors can do to shore up and reinforce that relationship with the clients they have today, the more likely they’re going to get the children of their clients today and the grandchildren to stay on as wealth advisory clients,” Goldberg said. “It is just about relationship building and maintenance through cybersecurity.”
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