Fraud Increase Amid New Cyber Threats
Fraud has surged with the development of advanced cyber technologies and tactics by criminals. Wealth management clients have become primary targets due to their higher risk profile and substantial assets.
According to
Tracy Goldberg
, Director of Cybersecurity at Javelin Strategy & Research, as detailed in the report
The Understated Cyber Vulnerabilities of Wealth Management Clients
, wealth managers must develop strategies to protect their clients. Effective defenses are crucial for financial advisors not only to safeguard clients but also to build long-term relationships.
Considering the Whole Household
The fraud landscape has changed significantly with the advent of artificial intelligence, making it harder to distinguish between legitimate communications and fraudulent attempts. Cybercriminals now frequently use sophisticated phishing tactics impersonating major companies like Amazon or PayPal.
With more detailed personal information readily available online, bad actors can craft convincing messages tailored to their targets. This knowledge allows them to send timely and personalized emails or texts, mimicking friends or relatives to deceive victims.
It is not just the wealth management clients but also their families who are increasingly targeted by these sophisticated schemes. Goldberg noted in a survey that among most wealth advisors, many of their clients have children under 18 living at home. This demographic was found to be more vulnerable to social engineering attacks.
Children can be especially susceptible due to their greater online interaction and tendency to share personal information freely. They are also active on platforms like YouTube, Instagram, and online gaming communities such as Fortnite, making them prime targets for cybercriminals.
Wealth managers should consider the entire household when developing protection strategies. Seniors, who may be less experienced in recognizing cyber threats but are increasingly using digital platforms, are also high-risk targets.
Protecting Identities and Accounts
While wealth management clients do not face unique fraud risks compared to the general public, they have a valuable resource in their financial advisor. However, many family offices may overlook cybersecurity as a potential risk.
Goldberg recommends that advisors leverage this relationship by educating clients on best practices and offering white-labeled identity theft protection services. This approach not only mitigates the risk of fraud but also reinforces client relationships.
Educating clients about current fraud trends and having clear action plans in place are key steps for wealth managers. A growing array of software tools can further assist in protecting sensitive information.
Building Relationships Through Cybersecurity
As concerns over rising fraud increase, many wealth management clients seek guidance on how to protect themselves. Providing cybersecurity education and creating prevention plans can significantly enhance the advisory-client relationship, potentially extending it across generations.
Goldberg emphasized that strengthening this relationship through cybersecurity efforts is crucial for ensuring long-term client loyalty and building future generations of clients.