Fraud and the Financial Advisor

Fraud is a confidence killer. It cuts at the underpinnings of the advisory relationship, with the brazenness of con artists matched only by the range of schemes in play. These include elder and identity fraud, the theft of personal information, and schemes targeting emotional susceptibilities, such as romance scams. 

Compounding human frailties are those built into the advisor tech stack. This stack is extensible and interconnected, reflecting an expanded digital surface area and the degree to which management of the client relationship mirrors the way individuals interact more broadly. The proliferation of communications channels and the use of consumer technology for business purposes makes playing defense hard. 

Fraud mitigation efforts span the advisor workflow, from account opening to transition, and carry signal importance in the current market environment. Hence the willingness of most advisors to roll up their sleeves and help clients tackle fraud when it happens. Such hands-on efforts come late and mirror process-heavy, pre-pandemic approaches to KYC and relationship management. They are inadequate in a remote-first environment replete with hackers, scammers, and other bad actors.

Key questions discussed in this report:

• How do advisors view their responsibilities in terms of combatting fraud and cybersecurity?
• How can advisors and their firms bolster their fraud and cybersecurity efforts?
• What specific tools and technologies will be useful in protecting advisors and their clients against fraud and cyberattacks?

Companies Mentioned:

ACA Group, American Institute of Certified Public Accountants (AICPA,) Callsign, Coretelligent, Equifax Identity & Fraud Services, Experian, Fenergo, Financial Services Institute (FSI), Financial Industry Regulatory Authority (FINRA), Fractional CISO, Intellicheck, itSynergy, Jumio, Kroll, LexisNexis Risk Solutions, Mitek, Nitrogen, North American Securities Administrators Association (NASAA), Quantexa, RIA Compliance Group, Securities and Exchange Commission (SEC), smartKYC, Trulioo, Veriff, Visory, XYPN Network