Along with a volatile economic landscape, financial advisors have another potential financial liability to worry about: Information cyber theft.
With the increase in worldwide cyber crimes, smaller private businesses may be more vulnerable than larger ones, said an executive of Chubb Group of Insurance Companies.
"It's the perfect cyber storm,'' said Ken Goldstein, vice president of the Chubb Group of Insurance Companies. "We're in a bad economy; we've got private companies, generally small to middle in market size, that are strapped in what they can spend on intellectual property protection,'' he said.
At the same time, he said, new technology means "cyber thieves can essentially hack from anywhere around the globe.''
Goldstein said private financial services firms are at higher risk of cyber theft because of the nature of the financial data they keep on their clients. "If you think of it within the context of private companies and financial planners and the CPAs, there's some pretty valuable stuff in there from the perspective of a global hacker.'' he said.
Seventy-three percent of small-to-middle-sized companies experienced a cyber attack in 2010, and 30% of those attacks were extremely effective, according to Symantec, a software security developer based in Mountan View, Calif.
Ninety percent of U.S businesses-large and small-fell victim to a cyber security breach at least once in the past 12 months, according to the Ponemon Institute, a research firm in Traverse, Mich..
Cyber crimes can do serious harm to an organization's bottom line. According to Ponemon's, the median annualized cost of cyber crimes for the 50 organizations studied was $5.9 million, with a range of $1.5 million to $36.5 million. This represents a 56% increase since last year.
Ponemon also estimates this year that the cost associated with each breach has gone up to $214 per record.
"Multiply that by the number of customers that you service; it could be a sizable amount of money that a company would have to pay out of pocket," Goldstein said.
The most costly cyber crimes are those caused by malicious code, denial of service, stolen devices and Web-based attacks, Goldstein said. Besides deliberate cyber theft, Goldstein says company information loss sometimes is a byproduct of employee negligence. An employee losing their mobile device at a hotel or restaurant, for example, could lead to a breach, he said.
"Negligence is a big issue," he said.
Goldstein's advice to small private firms is to nvest in the best technology they can afford. THey also need to assess their network security and draw up privacy plans.