Affluent families are increasingly targeted by criminals and financial advisors must take a more proactive stance to mitigate the cyberthreats, for both clients and their children. According to Javelin’s wealth management research, a large 45% of investors say they expect their wealth management advisors to educate and shield them from cyber and fraud risks.
In a recent PaymentsJournal podcast, two Javelin Strategy & Research analysts—Tracy Kitten, Director of Fraud and Security, and Greg O’Gara, Lead Wealth Management Analyst—discussed the emerging cyberthreats to families and how wealth managers can safeguard their clients against.
Building on Trust
Ongoing financial advice requires a bond of trust between advisor and client. With the expansion of digital engagement, and the ability for consumers to seamlessly spend and move money, advised clients now expect wealth managers to extend this bond of trust to their cyber well-being and digital financial security. Often, the same advisor has been with a family for decades, and the client-advisor relationship can span generations. As new cyber threats emerge, clients will increasingly lean on wealth managers for support.
“Advisors must consider their value proposition and move toward holistic financial planning,” O’Gara said. “They must foster engagement through ongoing conversations about risk in terms of goals and investments. Once that level of engagement exists, advisors must further nurture their clients and educate them about cyber risks and how they can protect themselves.”
Because cyber risks often extend to a client’s entire family, it’s critical for the financial services industry to protect children and elderly relatives, those who are increasingly vulnerable.
“Most adults are relatively savvy,” Kitten said. “They’re doing a good job of keeping up with the new types of scams and emerging fraud trends. Elderly populations, on the other hand, don’t often have that digital know-how. Children between 10 and 14 know the technology but they aren’t as well-versed in identifying fraud.”
Standing up for Children
Organizations like AARP have taken a proactive stance with elder fraud and corresponding tactics criminals use to target older consumers. With children, however, it’s often assumed that a parent or guardian has a child’s best interests at heart. Unfortunately, many parents simply aren’t aware of the risks.
Affluent households are increasingly popular targets for cybercriminals. Affluent children are more likely to have their own tablets, mobile phones, and other devices. They use gaming and social media apps more frequently, and they can typically purchase and download apps more freely. Those factors dramatically increase affluent children’s digital footprints, and with that increased footprint comes increased cyber risk.
“Criminals manipulate their targets, and that’s why they often target children under 18,” Kitten said. “Gaming and social media are the primary platforms cybercriminals use to communicate with children.”
Parents often aren’t fully aware of the interactions their children are conducting online. Another main reason many children are vulnerable to fraud: Their parents give them unlimited and unsupervised access to the internet.
Social Oversharing
Experts mostly agree that children under 14 shouldn’t have social media accounts; but 10- to 12-year-old children from affluent households are more likely to have social media accounts than their less-affluent peers.
“It could be due to how parents themselves feel about social media,” Kitten said. “If parents are oversharing about themselves on social media, they’re probably oversharing about their children, too. Criminals pick up on that. Once they target a kid, the child can be socially manipulated into perpetuating a scam.”
It can be even more damaging when a child’s identity or persona is taken over or mimicked. Criminals can then use that stolen identity or mimicked persona to manipulate other members of the family or to open new accounts using the child’s name.
Getting Cyber Support
Financial advisors do not have to become cybersecurity experts. Identity protection services (IDPS) providers specialize in identity fraud prevention, and many such companies offer turnkey solutions.
“Financial advisors could do a much better job of partnering with identity protection services providers, or at the very least recommending them to their clients,” Kitten said. “Portfolio planning should always include identity protection for the entire family.”
Family offices, for example, often focus on physical client protection, travel protection, medical backup, and security for their inhouse systems, but there’s a gap when it comes to cyber fraud protection for the client, O’Gara said. Closing the client gap starts with education.
“It should be a topic that drives engagement with clients [across wealth models],” O’Gara said. “It’s a great way to show empathy and interest in your clients’ families. If you’re doing financial planning, you’re already discussing beneficiaries and learning about their holistic financial picture. Discussing fraud prevention is a great way to further the relationship and show more value to your clients. There’s an opportunity to expand that conversation all the way from ultra-high-net-worth individuals to the middle market.”