Working as a registered investment advisor (RIA) is a career path that comes with a fair amount of risk, and most RIAs know how to navigate this in their industry. Though risk management is a core point of focus for RIAs, one kind of risk is dominating news headlines for advisors recently, and many are not prepared for it.
Cybersecurity risks are at an all-time high and being able to manage these risks can play a significant role in the safety of your clients—and the security of your reputation. In this article, we will explore why managing cybersecurity is so important for advisors and what steps you can take to keep your clients safe.
Cybersecurity Risk and Asset Management
By now, the average person is well-acquainted with receiving the occasional notice of a data breach. Some data breaches are nothing more than a lost email, but others, like the Equifax data breach of 2017, can have significant repercussions. The financial industry is at significant risk for data breaches, and this change is impacting investment advisors in a big way.
A Prime Target
As a registered investment advisor, you are responsible for managing the private information of your clients. Given the nature of the work and the high dollar amounts that are involved, it is common for hackers and other digital criminals to target advisors and their clients in any way that they can. For these criminals, investors are a prime target that can offer a significant payout, which is why they are turning their attention to financial advisors in particular.
Hacking, Data Breaches, and Phishing
There are several different ways that cybercriminals will target registered investment advisors and their clients. Knowing how these attempts work a great way is to remain vigilant. Advisors are already at an increased risk of being hacked, which can result in notable data breaches.
Phishing attempts, where cybercriminals obtain information through seemingly authentic links and emails, can lead to significant risk and loss for your clients. Already, large-scale efforts are being made to infiltrate financial firms and others in the industry. Some of them are very difficult to detect without proper training and software in place.
These breaches can have a large impact on your reputation and the trust that you have built with your clients, which is one of the many reasons that you need to stay informed and proactively evaluate your systems and who has access to them.
Mitigating Risk as an RIA
Registered investment advisors are generally quite familiar with mitigating risk, and they tend to do it very well. In the era of cybercriminals, advisors need to take active steps to mitigate an entirely new digital risk in order to meet the changing regulatory standards.
Staying Up to Date on Best Practices
The best way to keep your clients safe is to place a deep focus on current and expected cybersecurity risks. As an advisor, you are responsible for protecting your clients, which means that you will need to have the right information to do so. This is where best practices come in.
Most advisors use best practices to ensure that they are providing exceptional service to their clients, and cybersecurity is another area where this applies. Staying up to date regarding what best practices can be used to prevent data breaches can have a significant impact on the overall security that you can offer. These requirements change as we learn more, which means you will want to continuously seek out new best practices to protect your practice, reputation, and your clients.
Implementing an Active Cybersecurity Strategy
Ensuring security for clients means having an active strategy in place to do so. A true strategy is necessary to ensure that client information and accounts maintain their security, particularly if you have others working in your office. This means having a designated approach to maintain security.
Maintaining a Dynamic Approach
The nature of cybersecurity is dynamic, which can make it fairly difficult to navigate. As nice as it would be if cybercriminals stuck to the same handful of schemes, this really isn’t the case. Every single day, cybercriminals are finding new ways to infiltrate companies in the industry, and these changes can be difficult to follow.
Maintaining a dynamic approach means taking active steps to adjust your cybersecurity strategy as an independent RIA. The same handful of steps will not keep clients safe in an environment that is constantly changing. Just as advisors needed to pivot and deliver more virtual onboarding tactics in 2020, those cloud systems and the increased usage of email can pose more risk if proper security programs and practices are not implemented. Your strategy must adapt to new changes as they present themselves. If it doesn’t, you will find that you are opening the door for additional risks.
Partnering with a Larger RIA
Overseeing technology and cybersecurity is no easy task, and independent advisors are struggling to grow their businesses when being bogged down by these operational, but crucial, areas. In addition to that constant oversight, cybersecurity protection systems can be very costly.
One of the best ways that an independent RIA can maintain the security of their teams and their clients is to partner with a larger RIA like Fragasso Financial Advisors. Though cybersecurity risks have been a threat for quite a while now, it wasn’t until fairly recently that cybersecurity policies and procedures are required by regulators. Leading these efforts are larger RIAs, like Fragasso.
Working with a larger can allow you to gain access to all the technology systems, policies, and best practice cybersecurity benefits. An independent RIA can benefit from the information, strategies, and tools that top-performing cybersecurity teams can provide when partnering with a larger firm. This is an excellent way to gain protection for your clients’ sensitive information. Larger RIAs have the resources for full cybersecurity teams that are committed to maintaining the highest security standards. With these industry professionals behind you, your office can adopt a dynamic approach to security that is needed to protect against current and future cyberattacks.
The Takeaway
The investment and financial planning industry is at a high risk of being targeted for cyberattacks, and that isn’t going to change any time soon. Knowing how to mitigate this risk and take active steps to provide safety and security for your clients is now a crucial part of the business. Do you have the time and resources to remain informed and create your own plan? Or, is it time to explore partnering with a larger RIA to gain this protection as well as many other resources to position your practice for growth?
Investment Advice offered by Investment Advisor Representatives through Fragasso Financial Advisors, a registered investment advisor.
