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Financial Planning > UHNW Client Services > Family Office News

Wealthy Families Vulnerable to Security Threats

By Michael S. Fischer

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Few wealthy families are well informed about non-investment threats they may face, according to a survey of single-family offices released Monday by The Family Wealth Alliance.

FWA’s 2012 Inaugural Security Study found that sustainability, data loss due to computer failure, and fraud or other loss related to transfer of client funds were the top non-investment risk to private families.

Other risks can come out of left field. For instance, a family’s name can be sullied owing to neglect of reputation management.

FWA conducted its study in two parts. First, it asked 35 single-family offices to answer a special set of security questions as part of its 2012 SFO Study. Then, it asked 24 single-family offices, multifamily offices and external CIOs to answer a separate questionnaire.

The study included these findings:

  • 71% of respondents were “moderately informed” about the everyday security risks they faced, while 21% were “insufficiently informed” and 4% “not informed at all”
  • 71% of firms did not employ a security consultant
  • 29% of households they served had suffered financial fraud incidents
  • 21% had experienced burglary or robbery
  • 17% had experienced ID theft via email or Internet

“Many family offices do not understand the security risks that threaten both their reputation and tangible assets,” James Kane, president of HUB International Personal Insurance, which helped prepare the questionnaire, said in a statement.

“Awareness is the first step toward building a practical plan to reduce or transfer the non-investment risks that threaten family offices.”

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