Written by Amanda Jackson, Head of Technology at Equilibrium Financial Planning
In an era defined by rapid digital advancement, many aspects of finance are now conducted online. The ability for customers to manage their funds with the click of a button increases autonomy and efficiency, but this digital advantage comes with increased vulnerability.
Financial institutions have stringent processes in place to protect customer assets, but as the systems supporting the financial sector become more complex, cybercriminals are continually evolving their tactics. As these developments result in an unprecedented proliferation of cyber threats, financial planning firms have a responsibility to raise awareness and encourage good practices.
Below, we explain why educating clients about emerging cybersecurity threats now forms an essential part of the profession.
customer loss
Cyber-attacks are constantly evolving and criminals’ methods become increasingly sophisticated, making it important for financial advisors to be informed about new threats and technologies that could undermine their clients’ financial health and stability. It’s more important than ever to stay available. By not imparting knowledge about recent phishing scams and malware attacks, advisors are failing in their duty to promote the overall health of their clients.
In reality, customers who are not accustomed to using technology and online services are at a disadvantage, and are increasingly at risk of having large sums of money drained from their accounts or having their personal information compromised.
However, it is not only direct financial losses that customers may experience. Additionally, legal fees may be incurred, it will take time to recover lost funds and lost investment opportunities, and the resulting financial stress that clients will have to deal with.
Harmful rumor
While a lack of cyber education can have serious and far-reaching implications for clients, the same is true for advisors. Failure to promote safe online habits that prevent account break-ins can seriously undermine the trust that is the foundation of the advisor-client relationship. Clients may feel that their advisor has breached their duty of care, leading to a loss of goodwill and trust and causing them to seek financial guidance elsewhere.
More broadly, negative perceptions about cybersecurity preparedness can damage an advisor’s reputation. Other potential customers may view someone who neglects their obligation to educate in important areas of financial management as limiting the company’s overall business growth. If client data or assets are compromised in a breach, financial advisors may also be subject to regulatory penalties and investigations for failing to follow cybersecurity best practices and data protection protocols.
Threat mitigation
The impact of cyber-attacks is clear, but what measures should advisors share with clients to mitigate these threats?
First, it is important to understand the characteristics of phishing attacks to avoid scams aimed at stealing personal information. These usually arrive as emails imitating banks or government agencies, tricking clients into clicking on malicious links and giving them access to their devices. Clients should always be informed of the intent of these schemes and advised to remove the messages immediately. Similarly, having a dedicated client portal with robust security means clients can communicate with their financial planning firm with confidence and avoid the vulnerabilities of email communications .
Advisors should reiterate to clients that they should avoid using public WiFi when accessing their online accounts and instead use mobile data or wait for secure WiFi.
You should also encourage the use of secure websites, indicated by https:// and a padlock icon. Similarly, clients are encouraged to create complex passwords using multiple character types. Enabling two-factor authentication adds a layer of user verification beyond just passwords, and password managers can securely store multiple unique login information instead of writing them down.
Using careful judgment when sharing documents and information online limits our clients’ exposure to cybercrime. Additionally, downloadable antivirus software and firewalls add additional barriers against malware and hacking.
Responding to digital risks
Attackers are constantly developing more sophisticated scams, so maintaining an open dialogue with your clients regarding these new threats is paramount to maintaining their financial health. In addition to reactive alerts, advisors may proactively demonstrate useful tools such as virtual private networks and encryption of sensitive data.
After all, it is now essential for advisors to consider digital risk alongside traditional portfolio guidance if they are to demonstrate truly holistic management of their clients’ interests. Helping clients establish prudent online habits not only helps preserve their hard-earned savings, but also maintains relationships with advisors and clients who entrust their trust and future security to them. It also happens. Respecting this responsibility allows advisors to help their clients protect themselves and avoid potential damage to their credibility, reputation, and regulatory compliance.