Advisors can help their clients avoid potentially significant financial loss by recommending several actions to manage their sensitive personal information and guard against identity fraud during tax season.
1) Heed the Warning Signs
Beware the warning signs of fraud. If your clients receive IRS notices that indicate more than one tax return was filed, that there was an outstanding balance for a year you did not file a tax return or that you received wages from an unknown employer at any time, take action immediately. Run a credit report check once a year, every year, to ensure that no red flags have been raised.
2) Protect Personal Information
Advise clients to not share personal information over the phone, via mail or over the Internet unless they have initiated the contact and know who is receiving the information. Perhaps most important, always think twice before offering Social Security numbers and highly sensitive personal information of that nature.
3) Proactively Manage Clients’ Identity
Recommend that your clients engage with a personal information management firm. These firms can provide monitoring services during times of heightened vulnerability, such as after a home or auto break-in, during international travel or when making a residential move. Importantly, they can also help victims of identity theft recover after a breach has been discovered. Insurance companies that specialize in serving high-net-worth clients often provide access to the services of these firms on a complimentary basis, so wealth advisors should ask if their clients have a policy with such a company.
4) Explore Identity Fraud Expense Insurance Coverage
Even with the best protective measures in place, identity thieves may still succeed. For this reason, families and their advisors should seek homeowner insurance policies that include coverage for identity fraud expenses. While this coverage won’t reimburse the family for money that has been stolen, it will help with the legal fees, lost income from time taken off to meet with officials and other expenses related to recovering from the fraud incident. HNW-market insurance companies may offer up to $100,000 in coverage for these expenses.
Individuals and families with substantial assets face significant risks from identity thieves, hackers and other digital criminals—risks that are heightened before and after tax season. Advisors can best serve these clients by recommending a series of strategies to ensure the safety of sensitive personal identity information. By watching for common warning signs, being smart about sharing personal information, considering proactive identity management services and securing proper insurance, advisors and wealthy clients can work together to minimize these risks.