More On Legal & Compliancefrom The Advisor's Professional Library
- Where Are We Headed? The ultimate compliance goal is to help ensure that everyone associated with an advisory firm acts ethically at all times. Advisors and RIAs should do the right thing, even when regulators are not looking over their shoulders.
- Risk-Based Oversight of Investment Advisors Even if the SEC had a larger budget and more resources, it is doubtful that the Commission would have the resources to regularly examine all RIAs. Therefore, the SEC is likely to continue relying on risk-based oversight to fulfill its mission of protecting investors.
Client who do everything right to guard against identity fraud can nevertheless fall victim to scammers if their financial advisors aren’t equally prepared, warns NBC’s ‘Today’ show financial editor Jean Chatzky in her Aug. 28 “This Week in Your Wallet” column.
With internet use at record highs, people are increasingly careful in creating strong passwords, avoiding corrupted links and monitoring their bank accounts regularly, Chatzky says. And yet, she notes that a disturbing article in USA Today reports that financial advisors can just as easily fall victim to clever identity fraudsters.
Cyber-robbers are using “ginned-up e-mail messages” in attempts to con advisors into wiring cash from their clients' online investments to bogus accounts, according to the USA Today story. Chatzky urges both advisors and their clients to wise up and resist using e-mail as the final word on any transaction.
“Upon hacking into an email account and learning a person’s writing patterns, thieves are starting to reach out to their victim’s financial advisor and request a wire transfer of thousands of dollars—$35,000, in one case,” Chatzky writes. “The financial advisor, having corresponded with the client via email in the past, thinks nothing of it, and makes the transfer. It is only when the client calls and says, ‘Where did my $35,000 go?’ that the advisor realizes there is a problem.”
Chatzky reached out to Adam Levin, chairman of ID Theft 911, for some tips on protecting against this sort of identity scam. Here’s his advice:
Check up on all transactions. Doublechecking the success of every monetary transaction can seem cumbersome, but it’s worth the effort. “How many minutes a day do you spend on Facebook? And your e-mail?” Levin says. “Because scams are becoming more sophisticated by the day, there is a requirement on all of us to become more aware of what’s going on.” Levin himself always checks his account to see that the money went out, and then calls the person or organization on the receiving end to make sure it went through.
Set a protocol between the advisor and client. Establish a set of guidelines for how to move money. “Make sure you do not allow anything to happen unless you are part of the process,” Levin advises clients. “You set the rules. Whatever rules your advisors have, make your rules even tougher. This is your money.” As with any official contract, he says, the protocol should be written.
Read IRS Steps Up Fight Against Identity Theft, Phishing at AdvisorOne.