Fintech firms to use dark web to improve cybersecurity for advisers

United Planners, Redtail and others collaborate to launch a safer cyberspace for data

Oct 31, 2017 @ 2:00 pm

By Jeff Benjamin

The financial services industry has found its way onto the dark web.

Just don't call it the dark web.

"We're the new internet, which is like a layer on top of the internet," said Aaron Spradlin, co-founder and chief executive of CleverDome, a cybersecurity platform unveiled Monday in Las Vegas at the Technology Tools for Today Enterprise Conference.

"This technology that takes things dark has existed for years, but has mostly been used nefariously," he said.

In the most basic terms, CleverDome operates on top of the traditional internet and protects data in motion by encrypting it, breaking it apart and sending it along parallel paths, only to be reconfigured at the point of delivery.

For financial advisers and the various vendors and third-party companies working with financial advisers, this means a new level of cybersecurity, faster speeds and some additional fees.

The platform, which was developed in collaboration with TD Ameritrade Institutional, was rolled out with five launch participants, described as being "under the dome."

Initial participants include United Planners Financial Services, RedTail Technology, Orion Advisor Services, Riskalyze, and Entreda.

Doing business with a company that is "under the dome" protects data transmitted over that company's network. The fullest protection will involve bringing end-point and actual computers and computer networks under the dome, Mr. Spradlin said.

Having protection down at the individual computer level is important because before long banks and other financial institutions might not do business with companies or individuals that have unprotected systems and networks, he said.

"Cybersecurity problems are unsolvable because cybersecurity is based on a broken security model," Mr. Spradlin said. "The only real way to have data security is to take the data off the internet."

(More:SEC risk alert calls on advisory industry to do more to shore up cybersecurity)

Joel Bruckenstein, president of Technology Tools for Today, and host of the three-day T3 conference, described the CleverDome technology as a "potential game changer, if it gets traction."

"Only the top 1% to 3% of RIA firms in the industry have in-house cyber experts, and a good solution for them today might not be a good solution tomorrow," he said.

NetFoundry, representing the guts of the CleverDome offering, was at the T3 conference two years ago talking about its technology to encrypt and move large amounts of data. But the tech company didn't fully understand the financial services industry or how its technology could be utilized, Mr. Bruckenstein said.

Enter CleverDome, structured as Arizona benefit corporation, which is a kind of hybrid between a for-profit and a not-for-profit entity that is in some ways legally committed to operate in the best interest of the general public.

"It is a community-based organization," Mr. Spradlin said. "The mission and purpose is to solve an industry need to conduct business through safe, reliable and fast internet connections."

The not-for-profit part does not mean CleverDome will be giving away access to its alternative internet. Who will ultimately pay is still evolving.

As vendors and third-party providers sign up, the protection might be offered as a perk, and Mr. Bruckenstein said he could envision custodians or those outside providers picking up the tab for advisory firms to sign up.

Mr. Spradlin did not disclose specific pricing at the advisory firm level, but he compared it to a monthly Netflix account.

Even though the platform was unveiled Monday, it still needs partnerships with more broker-dealers and venders and advisers to develop and expand the system.

(More:Cybersecurity: How to satisfy regulators)

Consumers represent the next phase, and something Mr. Spradlin hopes to have in place by this time next year.

It is possible that consumers will gain the cybersecurity protection as a benefit of working with certain financial institutions, he said.

In terms of the costs, it might be more easily justified because the technology increases internet speed by breaking up data and sending along multiple paths, Mr. Bruckenstein said.

"Financial firms move lots of data, and the cost might be the same as just paying for faster internet speed," he said.

Tim Welsh, president of Nexus Strategy, described CleverDome as a "very good first step to get a standard for cybersecurity, and one of the very few co-op initiatives that have gotten this far in the independent wealth space."

"Ultimately, it will depend on the custodians to cooperate," he said. "They originate and control all data flows, so if they don't all join in, and/or not start their own secure network, it will be a tough road ahead."

At TD Ameritrade Institutional, one of the four major custodians, there appears to be a green light to move forward.

"We were involved from the beginning, collaborating with the launch partners and offering our unique perspective as a custodian that integrates its adviser platform with 120 third-party technology providers, because we wanted to contribute our expertise toward a solution for advisers that could help increase their protection from cyber-fraud," said Jon Patullo, managing director of technology solutions as TD Ameritrade.

0
Comments

What do you think?

View comments

Recommended for you

Upcoming Event

May 14

Conference

Retirement Income Summit

Join InvestmentNews at the 12th annual Retirement Income Summit - the industry's premier retirement planning conference.Much has changed - and much remains to be learned. Attend and discuss how the future is full of opportunity for ... Learn more

Featured video

INTV

Regional brokerages are picking up assets, advisers from wirehouses

Senior columnist Bruce Kelly discusses with deputy editor Bob Hordt the impact of big brokerage houses pulling back on recruiting and regionals promising recruits less bureaucracy.

Latest news & opinion

With stock market in a correction, is a recession just ahead?

Some say the market is overreacting to bad news — but what if it's not?

10 tips for hiring top young advisers

Hiring is not easy and retaining good employees can be even more difficult. Here's a roadmap for bringing on new advisers and training them — and even firing them, if necessary.

Kestra Financial latest broker-dealer to be put up for sale

The independent B-D's owner, Stone Point Capital, has tapped Goldman Sachs to lead the deal.

Wells Fargo Advisors 2019 comp plan sees little change

But lowest-producing advisers face a pinch in pay.

8 adviser fears for 2019

Interest rates, trade wars and bear markets, oh my! Looking across the industry, here are some of the biggest concerns heading into the new year.

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