Broker-dealers deploying advanced cybersecurity measures

Tech experts are showing, not just telling, advisers that they are vulnerable to online threats

Oct 17, 2016 @ 11:57 am

By Liz Skinner

The nation's large broker-dealers are helping to protect financial planners from the threat cyber criminals pose to their business, even as advisers themselves tend to underestimate the risk.

Firms are moving beyond the typical warnings of avoiding public Wi-Fi and changing passwords. Broker-dealers today are testing adviser reactions by sending them fake phishing scams, creating secure instant messaging systems and encouraging use of dual factor identification for clients' email, among other steps.

“The bad actors have gotten even better,” said Mukesh Mehta, chief information officer at Cetera Financial Group, at an InvestmentNews roundtable of broker-dealer technology professionals last Friday.

During the 90-minute discussion, technology executives from four broker-dealers said cybersecurity is one of the most immediate threats facing financial advisers, something echoed by other financial technology experts who worry advisers aren't grasping the severity of the threat.

A former Wells Fargo Advisors Financial Network broker earlier this month was fined $5,000 by the Financial Industry Regulatory Authority for failing to detect a phishing attack that stole $350,000 from a client. She was also fired by Wells Fargo and suspended from the industry for 30 days.

Part of the problem is the high adviser workload that demands multitasking.

Securities America is one of the firms that's sending random emails to its advisers, mimicking phishing scams where the fraudulent communications appear to come from legitimate sources.

Advisers say they get caught in these scams because they are doing eight things at once and they distractedly click, said Doreen Griffith, chief information officer of Securities America.

“By sending these fake phishing emails we hope to remind advisers that you have to pay attention to what you're doing online, and you can't just assume what's being sent to you is not something that you don't want it to be.”

Advisers who click on the tests will be given a short video to watch about the practices they should be following, she said.

Phishing emails are especially dangerous because they may be part of a greater attempt to gather information about a firm or client that can be used to manipulate advisers into believing a transfer request or other action is really from a client or other professional, so-called social engineering attacks.

(More: Verification key to halting cyber scams)

These fintech experts suggest using client vaults to share and store documents for clients, instead of sending them through email, is one way to help.

Commonwealth Financial Network is unrolling a secure instant messaging system within the next couple months for its advisers to use with clients.

“That will be a place to steer those conversations so they're not trapped in their sent mail and they're now over in another place that the bad guys hopefully won't be able to get to,” said Darren Tedesco, managing principal for innovation and strategy at Commonwealth.

It will be integrated with its client app and portal, he said.

Other firms also have such systems in the works, but some point out having the technology is one thing, while getting clients and advisers to use it is another.

“At the end of the day, it gets down to convenience and really that customer experience,” said Ryan Reineke, vice president of technology for Cambridge Investment Research. “Everybody is always on their phone, so unless that communication is easily accessible there's a barrier to adoption in a lot of instances.”

Mr. Tedesco also advocates clients using dual-factor identification — where access to an account is only given after two pieces of information are supplied — for their email systems. Each week Commonwealth tech professionals help about 15 clients because their emails have been hacked and not one of those cases have ever involved a client who was using this extra safety tool, Mr. Tedesco said.

The firms also employ hackers to test the veracity of their own systems and test the third-party contractors they use and integrate with, the tech professionals said.

Broker-dealer tech executives, who right now also are significantly tasked with helping to ease the way for advisers to abide by the pending Labor Department rule on best interest advice for retirement clients, recognize security must underlie every effort.

“Taking the philosophy that you are going to get hacked at some point is basically the only way to operate,” Mr. Reineke said.

0
Comments

What do you think?

View comments

Recommended for you

Upcoming Event

May 30

Conference

Adviser Compensation & Staffing Workshop

The InvestmentNews Research team will present exclusive data and highlights from its bellwether benchmarking study that will identify best practices for setting and structuring compensation and benefits packages throughout your... Learn more

Featured video

INTV

Why a sabbatical is the perk advisory firms can’t overlook

Financial advice firms offering this benefit praise the impact its had on their businesses.

Latest news & opinion

Finra anticipates oversight role for SEC advice rule

CEO Robert Cook says one area for examination could be the proposed requirement that brokers act in the best interests of their clients.

IBDs with the most CFPs

Here are the 10 independent broker-dealers that employ the most certified financial planner professionals.

Why we must create a more diverse and sustainable financial planning profession

CEO explains how, why a firm should commit to conscious inclusion.

Pope Francis wants financial advisers to work like fiduciaries

Vatican bulletin admonishes advisers who act against the best interests of their clients.

Wells Fargo sees slowdown in advisers exiting this year

The 2016 banking scandal and public relations fiasco had alienated some of the firm's advisers.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print