It is nearly impossible to invest in stocks, mutual funds or commodities without placing investable assets in an electronic account that can be hacked by cyber-criminals.

Outside of putting money inside a mattress, or investing solely in collectibles, investors are in constant danger of seeing their assets affected by a criminal action taken against an electronic account. Many financial providers and banks have had accounts hacked. While it is difficult to measure the value of all the funds which have been put in danger of loss over the years, suffice to say the amount is huge, and the number of affected investors is in the millions.

If there is no way to ensure the safety of your funds at 100 percent, what level of trust can investors have about their investable assets? And when those investors are retirees, for whom income is flat and savings are virtually everything they have, how can they sleep at night?

Questions related to cybersecurity are the subject of Spectrem’s whitepaper Does “Safe” Exist: The Perils of Electronic Information.  Investors with a net worth over $100,000 (not including primary residence) were asked to explain how they feel about the security of their investable assets, and retirees noted that they are not overwhelmingly confident in the safety of their funds.

“While more and more investors are becoming accustomed to electronic and online servicing of accounts, retirees are still older than the general population and perhaps less likely to understand the risks, or more likely to be afraid of the risks,’’ said Spectrem president George H. Walper Jr.   “Advisors need to know just how worried their investors are about the security of their funds, and must address the company’s plans for providing security of their online services.”

According to the Spectrem research, 8 percent of retired investors have already suffered the consequences of having important financial accounts hacked. Of those, most were affected by invaded credit card accounts, although there were also reports of retired investors who have had investment accounts hacked as well.

Outside of the numbers of investors who have been affected, the Spectrem research did a deeper dive into the confidence retired investors have regarding the safety of their financial accounts. The first of several questions using a 0-to-100 scale, retired investors placed their concern about having accounts hacked at 55.96, which is perhaps the best example of uncertainty. The response seems to indicate that retirees don’t know how concerned they should be about the topic.

Furthermore, retired investors were asked how confident they are that their financial advisor or provider is providing appropriate protection of theriac counts, and those investors placed that confidence at 59.68, which is notably higher than the confidence of working investors (53.13).

Is that confidence, or wishful thinking?

The retirees report a much greater concern over the safety of their credit card and banking accounts than their investment accounts.But, perhaps the most revealing report comes from the question of whether retired investors believe it is possible to keep their personal information safe when conducting business online, and their response was desperately low, at 21 percent.

 

Top Takeaways For Advisors

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Advisors provide information to clients in every way, on every possible subject, but few subjects are of greater importance than making investors understand how safe their online accounts are, and what procedures the firm has instituted to maintain the safety of those accounts. They certainly can also promote the idea that investors need to keep an eye on their accounts frequently because the advisor and the provider have many accounts to worry about, whereas the investor can concentrate on their own account.

 

©2018 Spectrem Group