[Editor's Note: This is the sixth article in a series. To read the other articles, click here: Article 1, Article 2, Article 3, Article 4, Article 5]

More than ever when this pandemic subsides, the issue of cybersecurity is going to be front and center for the industry. And for industry participants it is going to be either a giant and costly inconvenience or a great opportunity.

The current pandemic has made it even more apparent just how dependent wealth management firms are on using the Web. Most have seamlessly shifted to operating remotely and what normally is done in the office now is largely being done from home. Videoconferencing—although not ideal—has allowed firms to sustain their personal connections with clients and employees. 

However, the past seven weeks have also been a hacker’s delight. Never has so much wealth management firm and client information suddenly been shared across different computers, cell phones and tablets from different locations all at once—and not always very securely. No doubt assorted criminals are already finding ways to capitalize, though we likely won’t find out exactly how for some time. 

When we do, many, if not most, participants will view it as (yet) another burden that they will somehow have to bear. But for a smaller number of more savvy and thoughtful firms, cybersecurity and its close cousin, personal privacy, create a competitive opportunity. This article—the sixth in a series on the future economic model of wealth management firms—looks at how to capitalize on these issues. 

To be sure, cybersecurity was already a big issue for every business. State-sponsored organizations like the Chinese Peoples’ Liberation Army and groups affiliated with the Russian government view cybertheft as a core business activity. Huawei, one of the world’s leading technology manufacturers, has even been charged with building tools into its networking equipment that facilitate hacking. 

Not surprisingly, several wealth managers have already been hacked and some client assets have been stolen. And while nearly every firm has taken steps to enhance its cybersecurity, wealth managers are just tiny enterprises caught up in global war and arms race and are facing well-funded opponents who are constantly seeking new ways to overcome any obstacles to stealing data.

As a former FBI director so eloquently put it, “There are only two types of companies: Those that have been hacked and those that will be hacked.” 

Firms who will succeed in defeating these crooks will be those that are much more proactive. They will also ultimately need to operate much more like the military.

But that will require big changes.

For example, many wealth managers currently allow their employees to use personal cell phones as part of their jobs. A cell phone, though, is effectively an unsecure computer connected to the Web that—whether turned on or not—can be used by a third party to hack into every other computer in the building.

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