In recent years, technology has offered high-net-worth individuals, families and their advisors unprecedented opportunities. They can connect, network and instantly share information, advice and personal communication across the globe. The ease and efficiency of modern communication has made the lives of wealthy families better, brought extended families closer and allowed easy and quick access to personal and financial information.
With the good that has come from technology in connecting the hyper-busy and far-flung members of many high-net-worth families, there are risks as well: privacy breaches at major corporations, personal and highly sensitive information being made public by hackers and children sharing too much information, for example. What, if anything, can advisors do to ensure family communications—which are so critical to staying informed and making important decisions—remain private and secure?
Families and their advisors have important challenges to address and must consider various questions: Where is the balance between open sharing of information and having a proper structure designed to keep this information secure? What are the ramifications of “maximum convenience?” How can the family keep current with innovation and technological change that may be hard to understand? These are questions families and their advisors must consider as they grapple with the benefits and risks of the new information age.
There are many challenges to consider:
• Scams: We rely on technology to a great deal, but it also makes it easy and possible for scammers to hit a larger number of targets. Think about pre-texting, which involves a scammer gaining unauthorized access to a person’s email account. The scammer then uses this access to send messages instructing an advisor to, for example, wire funds. Or by using unsecure wireless networks commonly found at restaurants or coffee houses, scammers can—with surprising ease—gain access to a user’s device along with any stored user IDs and passwords. Armed with this information, the hacker can then gain access to online banking accounts and execute fraudulent transactions.
Scams and hackers will always be with us. If anything, their efforts will grow. Although you cannot eliminate your risks, you can take a number of steps to greatly increase controls. Some of them are easy; some will involve technology infrastructure; and some will require effort. Smartphones, for example, can provide an easy-to-access, secure network for Internet-based communications for a nominal fee. Among your various responsibilities, you must protect your client family’s personal information. And of equal importance, you must take the lead in driving change.
• Education: Depending upon the generation involved, there can be a gap between privacy concerns and open access to information. Generally, younger people will share information readily (think of answering a survey that asks a person questions to get a $5 gift card—questions that can be used to access personal information!). By contrast, older people are more reticent about openly sharing information, but they may not have the background to ward off phishing (for example, a site that looks like a real banking website but asks for personal information the hacker then uses). As American Banker reported recently, “23% of recipients open phishing messages and 11% click on attachments to those messages.” Educating users on communication risks should not be an afterthought. Your business or your family’s information is only as secure as the defenses of your personal network and the weakest link on your network. For example, does your home wireless network have a challenging password to keep hackers from your computers? Do members use passwords such as “password,” reducing overall security?
• Cost: High-net-worth families may have concerns over the cost of putting proper technology in place to protect communications, but these costs must be weighed against the risks. Hackers will focus their energies on wealthy individuals because (1) they have the money; (2) their technology infrastructure may not be sophisticated; and (3) there is an inherent reliance on personal relationships and trust that hackers may easily use to their advantage (e.g., an advisor in the interest of responsive service readily acting upon an e-mail instruction that appears valid). The potential costs for ignoring the risks are real and growing. In the end, families and their advisors should ask the following: Can you put a price on your reputation should something be posted online that will forever be available?
• Stay current on trends: Find sources you can trust. Take steps to change behaviors and stay current with tools and practices to secure your world. There are professionals with blogs and firms that provide periodic technology updates that you can reference and share with others to ensure you are aware of current risks and the necessary steps to address them. Would you make investment decisions without getting an expert’s recommendations and assessing those recommendations against your risk profile? Technology has its own inherent risks that require an expert’s view, too.
• Personal responsibility: Would you leave account statements, wills or other sensitive documents visible at your home for others to read? Yet you may unintentionally be doing that by using certain “free” e-mail services with low security or providers that have the right to access your private information. Using these services is the same as talking loudly about personal issues in a crowded public place, so you need to make wise choices about online communication.