This risk threatens retirees’ nest eggs. How advisors protect them


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Forget volatility. The thing that keeps certified financial planner Neil Waxman on edge is clients’ cybersecurity practices and the threat of identity fraud.

“It’s not the markets that keep me up at night,” said Waxman, managing director of Capital Advisors in Shaker Heights, Ohio. “This is the thing that concerns me.

“It’s the thing that keeps me up at night more than anything else: a client getting hacked or something coming into our system, even though we have best practices,” he said.

Waxman is right to be concerned.

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Identity fraud — what happens when scammers use your personal information to open phony accounts – resulted in $16.9 billion in consumer losses last year, according to data from Javelin Strategy & Research.

Seniors are an especially tempting target for fraudsters, given the amount of wealth they may have accumulated by the time they’ve retired.

“Older people aren’t necessarily targeted more, but they tend to lose so much more because they’ve saved so much,” said Kathy Stokes, director of AARP Fraud Prevention Programs.

“These people are at an age where there is no way they will make up those losses,” she said.

Seniors are also hesitant to change their ways — including how they shop, bank or pay others — after a fraud incident.

Seven out of 10 consumers aged 65 and over were reluctant to change familiar habits, according to a report from Javelin Strategy and AARP.

Javelin polled 5,000 adults online from Oct. 22 through Nov. 4, 2019.

Financial advisors can act as a line of defense between their clients and fraudsters’ attempts to siphon off hard-earned savings.

“Advisors have a positive influence,” said Stokes of the AARP. “They can encourage clients to have safe access online to their accounts and talk to them about protecting information.”

Best practices inside and out

Compassionate Eye Foundation/Steven Errico

The Securities and Exchange Commission’s Office of Compliance Inspections and Examinations released a report earlier this year on financial firms’ cybersecurity practices. The issue has been a priority for the regulator.

Best practices in terms of cyber hygiene include having detailed written policies and procedures to ensure devices and data are safeguarded, as well as having tests and monitoring.

For advisors, this means they not only stay on top of their own security, but they also pass those best practices on to their clients.

“Sometimes the biggest benefit we can provide to clients is to distill it into a checklist,” said Melissa Sotudeh, a CFP with Halpern Financial in Rockville, Maryland.

“There’s the basic checklist: Never send account numbers; don’t use unencrypted emails; and change your passwords,” she said. “Are you doing the right things?”

Sharing those tips could help advisors and investors mitigate risk down the line.

One of Waxman’s clients had a business email account hacked and needed to hire an IT team to address the problem.

The fraudsters sent Waxman’s firm requests for money, including a wire authorization with a signature that matched. The firm called the client and denied the scammers’ requests for funds.

“We have a hold on that client’s account permanently – nothing can happen with the custodian until there is authorization from the both of us,” said Waxman.

ID theft prevention as part of review

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