MEMO TO FINANCIAL ADVISORS: By Howard L. Tischler —
As 2018 marches on, it might seem like the 2017 data breaches are old news.
But don’t be fooled: For anyone concerned with protecting financial assets, big data breaches of the recent past are a clear and present danger in 2018 and beyond. Here’s why.
The personal data that hackers stole – affecting 145 million Americans – may still be used to file a phony tax return, borrow money, apply for a credit card or withdraw money from financial accounts.
This illicit cache includes names, Social Security numbers, birth dates, addresses and, in some cases, numbers for credit cards and driver’s licenses. A lot of this information is difficult or impossible to change. In addition, as a breach becomes a distant memory, people are less vigilant about monitoring for the availability of this information on the Dark Web or the use of this information for illicit purposes.
Almost 1,300 data breaches were reported in 2017 — a 21.2 percent jump from the year before. A recent breach at Alteryx, a marketing analytics firm, potentially affected 123 million households.
There is no simple fix when personal information gets into the wrong hands. But financial advisors can help their clients greatly by offering useful guidance and recommending tools to protect them. As a starting point, here are five steps people can take to keep their data safe in the coming year:
1. File income taxes early to keep refunds out of the hands of identity thieves.
The tax-return scam is a particular worry for the New Year, and has prompted warnings from state comptrollers and experts around the country. Crooks armed with stolen Social Security numbers can create fraudulent tax returns in someone else’s name, and then swipe the refund.
The message to financial advisers, accountants and your clients is clear: Don’t wait around to file tax returns in 2018 – federal or state. Eva Velasquez, president of the Identity Theft Resource Center (https://www.idtheftcenter.org) makes the point nicely: “File first and beat the crooks.”
Tip: Even if you don’t have all your information handy, you still can file early and then file an amended return later if necessary.
2. Monitor all financial accounts, ideally every single day.
This routine scan should go beyond credit-related accounts to include all investment and bank accounts. It may seem like a hassle, but vigilance can make a great difference in your clients’ financial well-being. A credit report will not flag trouble in non-credit based accounts. To reduce this hassle, your client can subscribe to a service that will automate this activity.
3. Request a credit freeze to block criminals from opening new credit-based accounts under a fake identity.
This should be done with each of the three main credit reporting agencies – TransUnion, Equifax and Experian. (Consumers may have to pay to unfreeze their credit for certain tasks, such as applying for a mortgage, home equity line of credit, credit card or auto loan.) Also, be aware that a credit freeze will not prevent an identity thief from opening a depository account under a false name and using the account to deposit an income tax refund.
Consumers also can ask the three credit bureaus to put fraud alerts on their reports. This measure requires anyone opening a new account to give proof of identity. While not a sure thing, it will make it harder for a thief. The alert lasts for 90 days and may be renewed.
But remember: A credit freeze or alert will not protect you from wrongdoing that occurred before you took those actions, which is why it’s so important to take Step 4 —
4. Review credit reports with each of the three main agencies.
The credit-reporting agencies will provide this information free of charge once a year. Consumers should review their data at least that often – and more frequently if they have any cause of suspicion. Individuals can get their reports by contacting the agencies or going to: https://www.annualcreditreport.com/index.action.
Consumers who want an automated service to monitor their credit reports daily can do so at www.EverSafe.com – refer to the end of this article to set up your clients to receive a discount from you.
5. When appropriate, encourage clients to enlist a trusted advocate to help watch over their affairs. While not always needed, this can be a critical safeguard for people who are vulnerable.
The role of financial advisors is growing in this area. Under a new FINRA rule to protect seniors, broker/dealers are supposed to seek contact information for trusted individuals who can help in cases of exploitation. Firms also will be allowed to place a temporary hold on withdrawals if advisors are concerned about financial exploitation. These rules take effect on February 5 [Regulatory Notice 17-11].
More broadly, there are many circumstances in which it can make sense for people to ask trusted advocates to help oversee their affairs.
People with dementia or other serious health issues, Americans traveling abroad for long periods, and service personnel stationed overseas are among the many potential targets of scammers.
MY OWN MOTHER WAS A VICTIM
Financial exploitation took on a new meaning for me on a trip with my mother several years ago. We were attending a family graduation, and as time passed I noticed her memory was slipping and wondered if she was as sharp as she used to be.
When I took my mother home, credit card bills started to arrive, and alarm bells went off. How did my 80-year-old mother, a retired accountant living on a tight budget, rack up $8,000 credit card bills?
I discovered that a marketer had conned her into buying a deluxe auto club membership, including regular oil changes – even though she did not own a car, was legally blind, and no longer had a driver’s license! Meanwhile, a credit card company was charging her for a layoff protection plan, even though she had left the workforce years earlier. To cover these bills, she was withdrawing money early from her annuity and paying penalties.
In the end, she lost her life savings.
This episode occurred before data breaches had become so routine. But it highlighted the fact that exploitation of seniors and #ElderFraud are a growing concern.
Today we might be talking about your clients or their parents getting scammed, but this is a growing concern for all of society as people live longer, many with substantial nest eggs. Baby boomers control trillions of dollars in wealth, much of it in retirement funds. And as that big generation gets older, a treasury of life savings will increasingly beckon predators who are cunning with computers.
Stolen personal data can be the key to illegal withdrawals from investment and bank accounts, fraudulent applications for mortgages and other loans, theft of Social Security benefits and insurance fraud. A criminal can even use a person’s identity to obtain a SIM card, and then hack into their cell phone to make costly purchases.
No single tactic eliminates risk.
Important as it is to review credit reports, they will not reveal if someone files a fraudulent tax return, loads up on certain debt, such as payday loans, or opens a deposit account that does not have a credit line. A credit freeze may be warranted, but it’s no panacea.
It takes a real commitment, along with some technical know-how, to monitor all the financial activity in a person’s name.
Keeping a laser-focus on credit and other financial information is time consuming for anyone. For people with cognitive issues – or who find financial monitoring to be confusing or intimidating – it may be impossible. (And I haven’t even talked about the challenges of scanning the Dark Web or browsing the National Change of Address database to spot trouble signs.)
THE RIGHT TOOLS CAN PROTECT CONSUMERS
The good news is that tools exist to help. I launched EverSafe as a technology-based solution that alerts consumers to fraud and other problems across a broad range of their financial activity.
It can quickly spot red flags, including uncharacteristic withdrawals, missing deposits, changes in spending patterns, and new accounts, and it will provide instant alerts if any of these things take place. Speed matters, because hacked corporations sometimes wait months to blow the whistle on a problem.
Financial advisors can sign up for free, and then offer #EverSafe protection to their clients at a discount. Just click on www.EverSafe.com/Advisors.
Of course, there are other services to choose from. Whichever one is right for you, my basic message is that consumers need to remain vigilant, because personal data stolen yesterday remains a threat today and tomorrow.
FINANCIAL ADVISORS CAN BE PART OF THE SOLUTION
#FinancialAdvisors can provide a great service by talking to their clients about keeping personal data safe. This is an important conversation that can build loyalty. Many consumers will benefit from your professional guidance, which can safeguard their adult children and entire family.
After all, everybody wants to make sure a life savings stays secure.
Financial advisors are in a great position to spread the word: Protection of personal data should be a guiding principle for the New Year.
Learn more at www.EverSafe.com/Advisors