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HNW Investors Willing to Change Advisors Over Cybersecurity Issues

What expectations do wealthy investors have that their financial advisors are keeping their personal information and portfolio details safe from hackers?

According to a new study by the Spectrem Group, wealthy investors express confidence that their advisors can protect their financial information from being hacked, but they are willing to move their accounts if they feel their advisor is not doing enough to protect their assets.

The firm’s white paper, “Does ‘Safe’ Exist? – The Perils of Digital Information” (free registration required) finds that 65% of wealthy investors would consider moving their accounts to another advisor or provider if their personal financial information were compromised by hackers. Those most likely to move include older investors, professionals and business owners.

The white paper is based on an online survey of 598 respondents fielded June 15-22, 2018. All respondents had $100,000 to $25 million in household net worth and were either the primary financial decisionmaker or shared jointly in making household financial decisions.

Safe Keeping

Overall, wealthy investors gave a score of 57 on a 100-point scale (with zero indicating “not at all confident” and 100 “very confident”) in expressing how confident they are that their financial advisor is able to protect their personal and financial data from cyberthreats. At the low end were Gen X investors, who rated confidence in their advisor at 44; at the high end were retired investors at 60.

Addressing the Issue

With all the concerns and expectations that investors have regarding their advisors and the safety of their personal financial information, it is reasonable to think the topic might come up when investors meet with their advisors. Not so, according to the study — two-thirds of the investors said they have not had a conversation with their primary financial advisor about the firm’s cybersecurity protections. And when asked how confident they are that their advisors would announce that their system had been hacked, investors placed that confidence at 53 on the 100-point scale.

With the threat of cybersecurity remaining high and considering investors' willingness to jump ship, Spectrem recommends that advisors and providers should consider offering a “well-defined explanation of the procedures” they have instituted to protect their clients’ personal financial and portfolio information. “A conversation about the technological practices of the company should make investors feel more confident about placing their funds with their advisor,” the report emphasizes.

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