Trust is the fundamental building block for any business. In finance, it gets even more important—nobody wants to allocate their wealth to a partner whom they cannot trust. How do you build it, then? By showing your clients that you can keep their data safe. In this article, we shall look at the digital side of this, focusing on cybersecurity in wealth management. Do you want to learn more? Then keep reading!
What Is Cybersecurity in Wealth Management?
Cybersecurity in wealth management refers to all the practices you put in place to protect your clients’ sensitive information, their portfolios, and your internal company data in the digital realm. It is meant to protect both your organization and its clients. Cybersecurity involves numerous key areas; it can be divided into:
- network security,
- application security,
- information security (also in compliance with the laws, like GDPR),
- operational security,
- disaster recovery,
- end-user education.
If we look even deeper, each of these areas can be further broken down even further. After all, cybersecurity in wealth management, or any other area, involves:
- gathering threat intelligence,
- monitoring the systems and networks for vulnerabilities,
- reducing potential attack surface,
- testing the defenses (e.g., penetration testing).
When it comes to wealth management, you need to remember that cybersecurity does not refer purely to protecting the information and systems you own but also to securing the data acquired from other sources, for instance, in the process of portfolio consolidation. It’s a highly complex process that requires multiple, diverse skill sets and a holistic overview of your IT infrastructure.
Why Does Cybersecurity Matter in Wealth Management?
There are three main reasons why you need strong and sophisticated cybersecurity, namely:
- building trust with your clients,
- ensuring compliance with the regulations,
- maintaining operational continuity.
If your system is weak, you are bound to suffer from a data leak or breach sooner or later. When that occurs, you risk not only losing your clients’ trust (and hence the clients) but also fines and investigations from legal bodies regarding your compliance with the imposed security standards. And this is not the worst-case scenario.
The most fierce attacks on your network and systems might block off access to parts of your IT infrastructure or corrupt the files, potentially affecting data accuracy. This can lead to the discontinuity of your operations or even prompt your teams to make wrong decisions (if the data corruption is undetected). The end result can be severe for your organization; therefore, you need to implement the highest cybersecurity standards when working in wealth management.
The Two Cybersecurity Strategies
In general, there are two viable cybersecurity strategies for your wealth management branch or firm. What are they?
Outsourcing a Cybersecurity Team
This strategy is mostly viable when you need quick and dependable fixes or additional resources to handle an ongoing attack. One of the main benefits here is that you can hire experts with specialization in particular fields of cybersecurity, thanks to which you can deploy the best measures for each element of your wealth management IT infrastructure.
Organizing an In-House Team
An in-house team is better because it enables you to continuously monitor the cybersecurity of your network and systems. Naturally, it might get a bit more expensive (you need to pay the team whether you’re attacked or not), but it usually pays off in tighter defenses.
What Do We Recommend?
Ideally, you should have an in-house cybersecurity team and outsource additional experts if needed. However, in most cases, it’s good to have people from outside your organization testing your defenses, as they might imitate the attacker better (since they don’t know the ins and outs of your business).
Cybersecurity in Wealth Management: Best Practices
Finally, let’s get to the best practices regarding cybersecurity for your family office, private bank, or investor firm. How should you approach this topic? Take a look below.
Train Your Team!
According to IBM (via Harvard Business Review), about 60% of cyber attacks are carried out from the inside. This involves threats such as:
- password leaks (highly unlikely),
- identity theft,
- human error,
- malware installed through phishing attacks.
That’s why, you should start strengthening your cybersecurity from the users. Start from training your employees about the potential threats, how to detect them and where to report them. Make sure they’re educated about data processing best practices, for instance the fact that they shouldn’t send their information to unsecured, private networks. The better you train your team, the lower the risk of attacks.
Foolproof Your Data Security
In reference to the previous point, sometimes human mistakes are impossible to avoid. In such cases, you are exposed to risk…unless you foolproof your procedures.
For instance, one common cause of data leaks is making a typo in the email address and sending sensitive information to the wrong user. But, if you protect such information with a password known only by the intended recipient, such typos will no longer pose a threat.
Use Reliable IT Platforms
Wealth management involves not only collecting and storing data but also acquiring it from various sources, like custodian banks, through an API. This creates an additional attack surface. Moreover, your platforms and applications, if created by third-party providers, cannot be modified—you won’t foolproof them unless they come with relevant functions. Finally, you need to know how and where your data is stored when using cloud-based platforms—this can be a make or break regarding cybersecurity.
How do you handle all of this? You must select a highly secure solution from a reliable provider, such as our platform for wealth managers. The application should include both quality data protection measures and elements like two-factor authentication, token authorization, and login monitoring that will protect you from the consequences of identity theft or a leaked password.
Finally, you need a platform that stores data in the most secure way. This is why at WealthArc, we work only with reliable and trusted database providers who employ the finest cybersecurity measures. Moreover, we go the extra mile and store each of our client’s data separately to maximize the protection.
The Takeaway
Knowing the best cybersecurity practices for wealth management, you are ready to implement them in your organization. If you’re interested in our application, feel free to contact us at WealthArc—we will gladly answer your questions!
You may also read: Take your company’s cyber-security to a new level with WealthArc
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