Homeland Security

This process is mandatory, if not completed within the nearest time, your account may be subject to temporary suspension.”

This particular scam used Citibank as the front, but SunTrust, eBay, and various Internet service providers have also been victimized. Consumers who take the bait are usually directed to a Web site that looks legitimate, but is actually used to steal personal and financial data.

In a time when more and more clients rely on e-mail messages and the Internet to keep track of their investments and to handle many of their transactions, it’s imperative for advisors to stress the importance of computer security. “I ask for a lot of information from clients as we do reviews,” notes Mark Ferris, an advisor in Old Saybrook, Connecticut. “I always say, do not e-mail things like mortgage balances, credit card balances, or beneficiary Social Security numbers. You can leave it on voicemail or fax.

They’re relatively secure. But you’ve got to avoid the temptation to send stuff by e-mail, even attachments.”

Ferris also stresses the importance of protecting your computer from spyware. He notes that most of it has relatively benign marketing motives, but there are programs that attempt to hijack a computer’s CPU for use as a remote spam server and others that can capture personal data that the user thinks is being relayed to a secure site.

Robbed the Old-Fashioned Way

While cyberattacks are the latest weapon in the identity thief’s arsenal, even in the 21st century, tried-and-true con games and outright stealing continue to work pretty well. Resourceful identity thieves can get your clients’ personal information in a number of ways. “Dumpster diving,” which, as it sounds, entails going through Dumpsters and trashcans to collect personal information, is among the simplest, and most effective, methods, but there are others. Credit card numbers are sometimes copied or memorized by sales clerks and waiters, or even captured by electronic “skimmers,” which can be installed on legitimate terminals by unscrupulous employees for later downloading.

Sometimes it’s that guy watching you punch your code numbers into an ATM or public phone.

Advisor Ferris had recent experience with both. A client who began noticing unauthorized charges on his American Express card ultimately determined his account number was skimmed at some point while he was on vacation in Puerto Rico. Ferris himself had his long distance card’s number lifted when he stopped to make a call at a rest area on the New Jersey Turnpike. When calls to Nairobi started appearing on his bill, he knew there was something wrong.

Other problems can arise when tax notices, financial account statements, and other bills are stolen right from the victim’s mailbox while he remains totally unaware. That’s suspected in a case recently dealt with by Jim Murphy, a CPA and financial planner with Lucas, Horsfall, Murphy and Pindroh in Pasadena, California, who unfortunately is more familiar with the problem of identity theft than he would like. “We’ve had three clients within the last eight or nine months where we’ve had to deal with it,” he says. “One case involved what we believe was mail theft. The [thieves] went out and started opening up mortgage accounts and credit card accounts and we didn’t find out about it for eight or nine months, when our client went to refinance their house. At that point, we stepped in and notified the credit bureaus and got everything knocked off pretty quickly.”

He also has an elderly client who had a credit card taken, probably by one of her caregivers. Some $50,000 in charges were run up on that card (which were absorbed by Merrill Lynch, the card sponsor) and an attempt was made to fraudulently obtain a MasterCard in the same name. Unfortunately, it’s not only strangers that your clients need to worry about, as Ted Feight, an advisor in Lansing, Michigan, can certainly attest. Feight has clients who suffered losses that he estimates at around $170,000 at the hands of their granddaughter and her husband.

The story he tells illustrates the wisdom of the saying, “The easiest way to make things difficult for your children is to make things too easy.” When the young couple had no money to go on a honeymoon, the grandparents supplied a credit card which they didn’t get back until bills much larger than the honeymoon had accrued. Then the young man wanted to open his own business and wanted them to give him $100,000. Feight advised his clients not to back the business venture, but couldn’t talk them out of co-signing a $25,000 loan, which with interest and penalties ended up costing the grandparents about $50,000. “Then this year we found out that he’d taken out an American Express and a Visa card in the grandfather’s name. They ran up another $100,000 on those credit cards before the grandparents knew what had happened.”

In helping his clients deal with this crisis, Feight had them listen to a tape version of The Millionaire Next Door, “especially to the sections on how to take care of your children and how not to. They were afraid that if they didn’t pay the bills or if they went to the police that they wouldn’t be allowed to see their great-grandchildren,” he explains. “Ultimately, they realized that unless they wanted the great-grandchildren to be like their parents, they had to do something about it now. They went to the police and filed charges.” Feight estimates that the experience cost his clients up to $175,000 in out-of-pocket costs at a time when the market and their investments were declining.

Ultimately, helping to protect against identity theft is bound to become just another way that advisors attempt to help preserve the financial health of their clients. As is the case with our physical health, it’s an area where an ounce of prevention is much more important than a ton of cure.

Staff editor Bob Keane, who shreds every piece of mail that enters his home, can be reached at [email protected].