ID Theft: How Advisors Respond

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?”