How to Keep Client Data Safe in an Unsafe World
As a financial advisor, you rely on the trust of your clients. In order to maintain this trust, you must be able to keep their personal information safe.
Unfortunately, cybersecurity attacks are on the rise. With more than 16.7 million victims of identity fraud in 2017, clients have good reason to value an advisor that is able to keep their personal information out of the wrong hands. It is possible to keep your clients’ data safe; however, it will require careful planning and attention to detail along the way.
Stay Up to Date on Encryption Software
One way to safeguard your clients’ data is through encryption software. You can and should use software to encrypt emails, shared files, and other sources of sensitive information.
Some states already require financial advisors to use encryption software. Massachusetts, California, and Nevada are a few of the states that currently require financial advisors to encrypt any personal information that could identify their clients. Even if your state does not require you to encrypt personally identifiable information, it is important that you do so.
You may be avoiding encryption software for any number of reasons. Maybe you aren’t familiar with the technology or would prefer to avoid confusing your older clients. Or perhaps the cost of encryption seems too high. However, these reasons should not stand in your way. Encryption software does not need to be overly complicated. If you aren’t equipped to install it yourself, hire a professional. And if the cost of this service seems prohibitive, think of the cost of a data breach. Should the worst case scenario occur, it would almost certainly cost you more time and money to clean up a data breach than it would to install encryption software.
How does encryption work?
Encryption works by hiding sensitive information from the prying eyes of hackers. Typically, it involves a complex algorithm that converts plain text data into seemingly random characters. Without a special key, it is almost impossible to decrypt. Since you will have the software key, you will see the data normally. However, those that do not have the software key will be unable to decipher your data.
In today’s market, most use at least a 128-bit key to safeguard data. Some even use higher encryptions such as the 256-bit. The higher the number, the more protection that is offered.
Many turn to secure client portals offered by third parties for their encryption needs. This creates a safe place for both you and your client to access data without fear of a lurking hacker. You should research a variety of vendors before choosing this route. Find a solution that suits your clients’ needs as well as your own. As you research different cybersecurity vendors, ask them questions about their security measures. The more security they can offer, the better protected your clients’ data will be.
What should be encrypted?
Encryption can be used to protect a wide variety of data sources. Consider encrypting correspondence between you and your client, the browser used to access data, emails, stored files, and other sources of personal information. Basically, if a file holds your clients’ data, then you should consider encrypting it.
Only collect what you need.
Encryption is a vital tool for financial advisors. However, some forethought into your data collection can reduce the need for encryption. With less to encrypt, you may potentially save time and money. Plus, the burden of protecting client data from the wrong hands becomes easier when there is less data to protect.
Although you will likely need all of the details of your client’s personal bank accounts, take a minute to think about what other information you actually need. Some information may be helpful to have, but may not be entirely necessary to performing your services.
Take a look at the data you currently collect from clients. Run through the list to see if you can eliminate anything. Think about what data you actually use and what data you seldom use. Removing an item from the initial information collection process doesn’t mean that you can’t obtain that information at a later date if necessary. Rather, it means that you don’t have the burden of protecting data that you won’t be using in the immediate future.
Remember, you can always ask for a piece of data later if it becomes relevant down the line.
Educate Employees on Client Privacy
The responsibility of data protection does not fall solely on the shoulders of your IT department. Even if you have all of the right encryption software in place and update it regularly, a data breach is still possible. In fact, many data breaches are the result of human error, not a breakdown of encryption.
A 2018 study found that over 25 percent of all data breaches in the U.S. were caused by carelessness or user error. You can help to prevent this from happening through employee training on procedures to protect client privacy. Providing your employees with the tools they need to handle client information safely is important. It is also a good idea to inform employees why is it critical to handle client information correctly. The costs of a data breach can be financially catastrophic to both you and your clients.
How to educate employees.
Creating mandatory training for employees is the best way to educate them. As you develop your company’s training program, consider that an employee with a broad knowledge of privacy and security requirements is better able to protect client data. With more knowledge, they are better prepared to prevent a breach and recognize system compromises. You should also consider more specialized training for employees who interact more closely with client data.
Teach employees the best practices of data management within your company. Provide them with all of the procedures to follow on the proper handling of your encryption key. Let them know how vital it is to protect client data from the prying eyes of would-be identity thieves. Help them understand the basics of the encryption software so that they are prepared to spot a potential breach quickly. Remind them that each employee is responsible for the protection of client data. Instill a sense of personal responsibility into each of your employees and provide them with the tools they need for successful data protection.
It may also be a good idea to create a manual of what your employees learn during their training for them to refer back to when necessary. A hard copy of this information can serve as a valuable resource as employees run into data-handling questions on the job. Also, consider regular training to keep employees up to date on the best data handling practices, as they will likely change over time. A quarterly or annual training should reflect any updates to the encryption software and changes to your data-handling procedure.
Create an Emergency Plan
No matter how much you plan, the possibility of a data breach is always present. As encryption software becomes more robust, criminals strive to undermine ever-evolving cybersecurity practices.
Data thieves have a good reason for their persistence. Data is one of the most valuable commodities on the market. With stolen personal information, a criminal can wreak havoc on a victim’s personal finances.
Unfortunately, data breaches are becoming more common every day. It is important to have an emergency plan in place so that you can protect your clients if a data breach should happen at your company.
Work with your IT department or a cybersecurity agency to build a plan for recovering and restoring stolen data. This plan should allow you to act immediately to rectify any potential data breach. It should include the details of your data recovery procedures, how you will make your clients aware of the breach, and your procedures for compensating affected clients. You should also consider investing in cybersecurity insurance. Depending on the coverage, this insurance plan could help to cover the costs of recovery and compensation for your clients. In the case of a cybersecurity catastrophe, an emergency plan could help to keep your company on track.
The Bottom Line
Data breaches are a threat to any financial advisor. The importance of encryption, proper employee training, and a establishing an emergency plan cannot be understated. By implementing a strong cybersecurity protocol in your firm today, you can help to ensure the long-term security of your clients’ data.
Axos Advisor is a program that serves financial advisors by offering exclusive bank accounts for their clients and a CRM dashboard to manage clients’ accounts. If you have any questions during this process, please don’t hesitate to reach out to our Axos Advisor team at 1-866-833-0529 or email [email protected].
How to Keep Client Data Safe in an Unsafe World
This blog post was published by Axos Bank on February 14, 2020 and last updated on January 4, 2023.