The threat of financial fraud looms larger than ever today, fueled by an increasingly digital world where just about any information can be accessed online. The convenience of online transactions brings with it the risk of instantly eradicating decades, or perhaps even generations, of hard-earned wealth. Given what’s at stake, financial advisors must play a crucial role in helping clients mitigate these threats, prioritizing fraud prevention strategies during regular discussions.
Just examine recent data from the Federal Trade Commission. Americans reported fraud-related losses of more than $10 billion in 2023 alone – a staggering figure that marks a 14% increase over 2022. Losses stemming from bank transfers and cryptocurrency transactions have become the most common means of theft for fraudsters, greater than all other methods combined.
As cybercriminal activity continues to escalate, advisors can enhance their client relationships by proactively discussing strategies to safeguard nest eggs against theft, helping to preserve clients’ assets for future generations. Here are some essential fraud prevention strategies that advisors should remind clients of on an annual basis.
Fortify Accounts With Complex Passwords And Dual-Factor Authentication
One of the first lines of defense against online fraud is robust account security. Encourage clients to create strong, unique passwords for each of their accounts, and remind them to update these passwords regularly. The utilization of a password manager can significantly enhance security by generating and securely storing complex passwords. Clients should also be reminded to avoid predictable patterns when changing their passwords. For example, simply adding or changing one digit in an otherwise familiar password can make it much easier for a cybercriminal to hack.
In addition to strong passwords, advisors should advocate for the implementation of two-factor authentication (2FA) on all financial and other significant accounts. This second layer of security requires users to provide a verification code, which is often sent to their mobile device as a text or via email, in addition to their password. This solution can make unauthorized access much more challenging, even if a hacker somehow obtains a client’s login credentials.
An Ounce Of Prevention Is Worth A Pound Of Cure
While establishing strong passwords is crucial, other proactive tools can be deployed to prevent clients from becoming victims of fraud. Freezing credit with the three major credit bureaus – Equifax, Experian and TransUnion – can effectively prevent scammers from opening new accounts in a client’s name. This process may require some effort, but it serves as a powerful deterrent against identity theft. Clients can then lift the freeze whenever they need to apply for new credit. This tactic can also help to protect credit if personal information was potentially compromised during a data breach, and even children without a credit record are eligible.
Freezing credit with the three major credit bureaus can effectively prevent scammers from opening new accounts in a client’s name.
Encouraging clients to sign up for transaction alerts on their credit cards is another effective preventative measure. These alerts notify clients of any unusual activity in real time, allowing them to quickly detect and report fraudulent charges. Going paperless also reduces the risks associated with physical mail theft and makes it easier for clients to monitor their accounts more regularly. It also can help them spot any discrepancies sooner than they may have from monthly paper statements.
Education And Support
Another essential aspect of combating fraud is educating clients about the latest scams that are circulating, especially since cybercriminals tend to be a creative bunch. Advisors should prioritize ongoing discussions about the importance of remaining vigilant against phishing attempts and other nefarious schemes. Stress to clients that they should share sensitive information only through secure, encrypted channels – rather than via email or text – which can significantly reduce the risk of data breaches.
Clients seeking additional support can also sign up for a credit monitoring or identity theft service.
Clients seeking additional support can also sign up for a credit monitoring or identity theft service, which can actively review credit reports to highlight any suspicious activity. These services can’t stop identity theft from occurring and may come with a monthly subscription cost. However, they can be valuable tools for early detection of suspicious activity, enabling clients to take quick action to mitigate any potential damage. Additionally, encourage clients to review their credit profiles at least once per year to conduct their own scans for fraudulent activity.
Protection Via Proactivity
Keeping clients informed about these essential safeguards, while maintaining open lines of communication about fraud prevention, can help to protect hard-earned wealth from the ever-present threat that cybercriminals pose. Taking a proactive stance may help clients avoid the emotional and financial toll of being scammed, helping to ensure that their wealth is preserved for the intended recipients.
Elias Crist is Associate Wealth Advisor at Regent Peak Wealth Advisors, an Atlanta-based RIA.
