With cyber fraud and scams continuing to rise, financial advisors can play a critical role in helping their clients fight this type of crime. Because of their affluence, wealth management clients are frequently targeted by long-running scams that can drain investment accounts linked to retirement, inheritance, and trusts.
Wealth Accounts at Increasing Risk of Scams and Cyber Takeovers, a report from Tracy Kitten, Director of Fraud & Security for Javelin Strategy & Research, lays out how financial advisors can protect their clients in these situations.
“The most surprising thing we found was that investment advisors know so little about cybersecurity,” Kitten said. “The onus has been more on the client to ensure that they are investing in identity protection and protecting their own accounts.”
Be Proactive
Victims of scams often report the crime to law enforcement or to the Federal Trade Commission, but neither typically provides much assistance to the end consumer. The FTC will add the record to its database to track the number of consumers victimized by identity theft, but it doesn’t help individuals resolve the issue or protect themselves going forward.
One of the most helpful avenues a wealth manager can take is to be on the front lines. Advisor should position themselves as the first point of contact when a client falls victim to a scam or even suspects they may have been.
“It’s critical to have that trusted advisor tell you, ‘Don’t feel shame, don’t be afraid to reach out to me,” Kitten said. “These things are very common, even if it turns out to be nothing, it’s better to tell someone about it than to not.”
This requires advisors to take a more proactive role in educating their clients and offering recommendations about identity theft protection. They should raise awareness about the prevalence of romance scams and wealth management scams, emphasizing how easy it is to become a victim.
Get Them to Open Up
When someone has been victimized by a scam, they often feel shame and embarrassment, leading to reluctance in admitting they have been scammed. So rather than reporting it or asking for help, victims might choose to absorb the cost or try to handle it themselves. By discussing scams before they happen, an advisor can help remove much of the stigma associated with being victimized.
Romance scams are particularly targeted, often focusing on affluent men of specific ages and economic statuses. An advisor can tell fairly easily which clients are likely to be targeted by these scams, and it’s usually men.
The fact that men are more likely to be victims of certain types of scams creates its own set of problems. Men may be more reluctant to admit they’ve been victimized, whereas women might feel more comfortable doing so because it’s more socially acceptable and there’s been more education encouraging them to ask for help.
“This is why the education around this is so important,” said Kitten. “These scams are effective for the cybercriminals because they rely on psychological tactics that make the victim feel shame. People need to hear, ‘You’re not stupid. You haven’t done anything wrong.’”
Protect the Generations
Wealth advisors often work with families across generations, making them uniquely positioned to address scams that can affect both younger and older individuals.
There’s an assumption that parents will protect their kids and their financial accounts, while the elderly may seem more vulnerable because their children or grandchildren might not necessarily protect them. Since older individuals often have a great deal of assets in their name, it’s important for the advisor to take the lead in safeguarding their well-being.
Advisors can build on generational trust by proactively educating their clients about the risks faced by both children face and elderly parents. They should tell them: “These are the types of flags to look for, and if any of these things happen, I should be your first point of contact.”
While there has been a lot of information disseminated in recent years about elder fraud and elder abuse, there has not been as much focus on child victimization. Although minors may not have substantial assets, they have clean credit. Their lack of a credit record makes them attractive to criminals, who can steal their social security number and date of birth to take over their identity and perpetuate new account fraud.
That’s where identity protection services (IDPS) come in. They raise flags if a child’s social security number appears on the dark web or if any kind of credit is opened in their name.
As this example shows, the advisor does not need to be an expert in cybercrime as long as they partner with someone who is. Identity protection services often work with banks or insurance companies to provide their service, but it can also be offered through a wealth management office. Advisors can white-label the service, brand it as part of their wealth management portfolio, and sell it as an add-on service to clients.
“When you have a wealth advisor, you have a long-term, personal relationship,” said Kitten. “Even if the wealth advisor isn’t in a position to help retrieve the lost assets and put things to right, they can at least be a trusted resource.”
Kitten recently participated in a PaymentsJournal webinar with Greg O’Gara, Lead Wealth Management Analyst at Javelin Strategy & Research, where they delved further into the emerging cyberthreats to families and how wealth managers can safeguard their clients against them. You can view the webinar here.