Close Close

Retirement Planning > Social Security

ID Theft: How Advisors Respond

Your article was successfully shared with the contacts you provided.

Baby boomer clients definitely are concerned about identity theft, says Neal Frankle, president of Wealth Resources Group, Woodland Hills, Calif. They also definitely are interested in learning how their financial advisor is safeguarding their personal information, he adds.

This article explores how financial firms are responding to the issue.

Financial product providers–such as insurers, banks and securities firms–already have extensive security in place. In fact, there has been “huge exposure and an onslaught of mail from the companies saying what they do with information,” says Sean Maher, principal of Valley Forge Financial Group, King of Prussia, Pa.

But advisors still need to have their own procedures, because that is where ID data first enters the system, say experts.

The subject comes up because advisors are noticing that consumers increasingly are asking ID theft-related questions.

This tracks with ID theft trends. Consumer Sentinel, the complaint database developed and maintained by the Federal Trade Commission, says it received more than 255,565 identity theft complaints in 2005–up from 246,847 in 2004 and 215,177 in 2003 (see bar chart). [Note: As a percent of all complaints received, ID theft actually is declining--but the complaint numbers are rising because all complaints are rising.]

Concern about potential identity theft has “never been an obstacle to doing business,” stresses Frankle.

Still, advisors need to address the issue with clients, he says. “It’s part of demonstrating that you are competent, capable, intelligent and caring. People need to know that you will take care of them.”

Financial advisors say they often hear ID theft questions when asking for Social Security and driver’s license numbers, birth information, etc. Sometimes, the questions pop up in the first get-acquainted session.

“The issue never has stopped the ball,” says Mark Briggs, managing member of Beacon Financial Advisory Group LLC, Glastonbury, Conn., “but there are definite concerns.”

For instance, people age 70-plus tend to be “petrified” of having any personal information on the Internet, he says. And while boomers, ages 40-60, are more Internet savvy and have fewer objections to using secure websites, they do ask questions about how personal data will be handled.

Boomers tend to have more privacy concerns and questions than other age groups, observes Maher. “They are also more reluctant to authorize us to supply the medical information to the insurance company. They’ll read the medical form very carefully, for instance.”

By contrast, Generation X clients often breeze right by the issue, Maher says. “They’ll say, ‘Where do I sign?’” That may reflect less experience in life, fewer assets to be concerned about and/or greater comfort about sharing information on the Internet, Maher speculates.

Don’t generalize too much about this, cautions Barbara Hanson, principal of Barbara Hanson Long Term Care Insurance, Felton, Calif.

“Some people are so trusting they’ll fill in a health questionnaire she has sent them and then fax or mail it back, no questions asked….On the other hand, everyone seems to be getting cautious about giving out their e-mail address.”

Usually, Hanson observes, a client’s “desire for information about a product or for actual coverage overcomes the natural desire for privacy and protection.”

Five years ago, the generational differences concerning ID theft were greater, notes Briggs. But now it seems “more widely spread.”

Today, people who do have concerns tend to ask their advisor certain questions.

Briggs cites these examples: “Am I going to start getting a lot of junk mail and spam from third-party marketers now? Who will have access to this information, once I give it to you? Will the company [financial provider] sell my information to a mutual fund company or someone else?”

Maher cites these questions: “Is your file room locked at night? Do the cleaning people have access? What are you doing with your trash?”

Maher hears this one: “Why do you need my Social Security number?”

Maher knows a man who was a victim of ID theft, to the tune of $9,000 in phony checks. That man is now very reluctant to give out his Social Security and driver’s license numbers together, says Maher. The man now also takes time to caution people about ID theft, saying, “this is what happened to me; don’t let it happen to you.”

The rising concern has not negatively impacted business, Maher stresses. But he still believes it is important to address ID theft issues with clients.

For instance, “in personal visits with clients, we do use paper. But we later scan it and store it on a secured network.” Then, staff members carry boxes of the original papers to a shredding truck that comes regularly, and “we watch it being shredded.” Paper that must be kept for compliance purposes is stored in a locked file room, Maher adds.

Frankle gives a privacy statement to each new client. He also shows clients around the office, indicating how things are locked up and who has access to what information.

“We offer to give back the papers that clients bring or to shred them.”

Frankle’s office does send out e-mail to clients, but he says “we don’t include account numbers or sensitive information.”

Briggs also uses a shredding service. “Nothing leaves here with a name and Social Security number on it,” he explains. “The data is secure in a backup facility. And any information on local computers is password protected.”

Hanson also uses a P.O. Box to ensure she receives mail from her clients. “I am in a rural area, so that’s a concern,” she explains. Like the other advisors, she, too, shreds papers she no longer needs.

Larry Brown, principal of Brown, Brown & Gomberg/CPS, Skokie, Ill., stores data online and also uses offsite storage. “We have our employees bonded, too, though we haven’t needed that.”

All the advisors spend time educating clients on why the information is requested. For instance, when asking for a photo ID during an in-home interview, Hanson points out “the insurance company needs this to be sure it is dealing with you and not someone pretending to be you.”

Brown explains the role of HIPAA and the Privacy Act. He also favors discussing “the information necessary to obtain coverage, how the insurance company goes about obtaining it, and how the company and the agency ensure confidentiality.”

Trust is the real issue, advisors agree.

If a client still has concerns, after the advisor has explained the need for information and how it’s protected, says Brown, “that means the client doesn’t trust the person he or she is speaking to, doesn’t understand the process…or has trouble believing the validity of the information provided.”

Brown says he has heard of advisors having problems obtaining ID information, but he says “I don’t have that problem.”

“You do have to perform your due diligence, but there also has to be a modicum of trust,” agrees Hanson.

Sometimes, trust is built into the relationship, observes Briggs. “For instance, most new clients come here as referrals, so they already know something about us….I am also a CPA, and people hold that out as trustworthy.” Even so, Briggs conducts two or three client meetings before asking for sensitive ID information.

Agents do need to address the issue, concludes Hanson. “We do have exposure–the potential for contributing to the loss of someone else’s identity.”

And remember, says Briggs, in client interviews “we are screening them as much as they are screening us.”


© 2023 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.