Category: Financial Advisors

Clients must trust their financial advisor for the advisor/client relationship to work. If you’re an advisor, that means handling your clients’ money responsibly, but in this day and age, it also means protecting your clients’ data. The problem is that keeping clients’ data secure isn’t always easy, and best practices are always evolving. Here’s how you can stay up to date on the best ways to protect and securely share data with clients.

What Data Must Advisors Protect?

Before we talk about protecting client data, we first need to take a step back and discuss what sort of data requires protection. Personally Identifiable Information (PII) is information, either sensitive or non-sensitive, that either on its own or in combination with other information, can be used to identify an individual. Social security numbers, driver’s licenses, and financial information are all examples of sensitive PII. Other types of PII are non-sensitive, but when used in conjunction with other data could also identify an individual. Date of birth, zip code, and place of birth are all examples of non-sensitive PII. Ideally, advisors will protect all PII, but sensitive PII is especially important to protect and should only ever be shared securely.

Sharing Files Securely

The nature of the financial advisory business requires the sharing of much PII and other sensitive information. Therefore, one of the hardest parts of protecting client data is figuring out how to send and receive data to and from clients. To make clients more amenable to any additional steps imposed by your cybersecurity policy, instead of framing cybersecurity as a regulatory requirement or a hassle, frame it as another aspect of your excellent customer service – something you want to go above and beyond on because you value securing the data of your clients.

1. End-to-End Encryption

One of the most common ways to protect data is through encryption. To send and receive sensitive information, you need encryption on both ends, which is called end-to-end encryption. This method of sharing data works so well because only the sender and receiver can decrypt the shared information and therefore are the only ones who can view the contents. While end-to-end encryption is a great option, it’s largest drawback has typically been that implementation is required on both ends, meaning that to share information with a client, that client must sign up for the encryption service. While not terribly difficult, this process may prove time consuming for the client.

Presults offers an innovative approach to this obstacle by utilizing a combination of auto-expiring pages and one-time verification codes that don’t require client registration.

2. Cloud Storage

Another option for sharing information with clients securely is through cloud storage. The point of storing documents on the cloud is to keep those documents from being stored on your computer’s hard drive (which is typically more vulnerable). The benefits of cloud storage extend beyond more securely sharing and protecting data. When documents are stored on the cloud you can access them from any device with an internet connection, which allows for easier collaboration on documents and eliminates the risk of losing documents if a specific computer is damaged, lost, or stolen.

3. Client Portal

The final option for securely sharing sensitive data with clients is a client portal. A client portal is a centralized, secure area where clients can login to view communications, reports, invoices, contracts, etc. A client portal is a great option from a customer service perspective since the burden on clients is minimal. The only downside is that not all portals allow for two-way communication, though some do. If you value two-way communication, you’ll therefore want to find an option that includes this offering.

Train Employees on Client Privacy

According to a report by the Financial Planning Association’s Research and Practice Institute, 44% of advisors say they don’t understand the risks and issues of cybersecurity. This is especially concerning considering that while 48% of data breaches were due to malicious or criminal attacks, a full 27% of data breaches were due to human error. Proper training is therefore necessary both to decrease the risk of human error, and to make it harder for hackers to take advantage of weaknesses in your cybersecurity. While education obviously can’t eliminate human error, it can help decrease the chances of it.

The proper training for you and your employees will depend on the various roles of those in the firm. Mandatory training should be required for everyone, which goes over the firm’s procedures for protecting client data. The reason why these procedures are necessary should also be included in the training. How do your procedures help limit the chances of a data breach? What would a data breach mean for the company? What would a data breach mean for the information and assets of clients?

Create a Plan for a Data Breach

No matter what precautions you implement or how well you educate your team, a data breach is still possible, which is why every firm should create a data breach emergency plan. Every plan will be unique, but should include the following: 
• Data recovery procedures 
• How you will notify clients of the breach 
• Procedures for compensating clients impacted by the breach.

For a more personalized plan, work with your IT team or IT consultant. The more quickly you can react to a data breach, the better, both for your firm and for your clients. Becoming aware of the breach quickly, notifying clients immediately, and communicating exactly how you will handle the data breach can help maintain clients’ trust in you and your firm. 

Another option that may be worth considering is cybersecurity insurance. Depending on the specific plan, this type of insurance could help you cover costs related to data recovery and compensating clients.

The Takeaway

Advisors have a duty to their clients, and that includes doing their best to protect client data. Presults takes protecting client data seriously, which is why its unique software flags emails containing PII and keeps them from being sent out. Unlike most other email archiving systems on the market, which only notify you after PII has been sent out, Presults gives you the ability to proactively protect the valuable data of your clients.

For advisors who have spent the majority of the last two years working in a fully or partially remote capacity, many of the benefits of working for a wirehouse may no longer outweigh the expenses and lack of flexibility. While branching out and building your own business comes with many perks, it’s also no easy task. In fact, almost 90% of financial advisors fail within the first three years. Here’s what you’ll want to know before you decide to branch out on your own.

1. What Services You’ll Offer and Your Revenue Model

First and foremost, you need a viable business plan. For example, many advisors dislike the minimum asset requirements common throughout the industry, but if your compensation is an AUM based fee, you may struggle to earn enough without minimums. This doesn’t mean you can’t work with a wider range of clients, it just means you may need to think outside of the box. Maybe you decide to offer three or four different services with different fee structures, which could allow you to work with a wider variety of clients while still maintaining a viable business. 

One of the biggest benefits of branching out on your own is the flexibility that comes with it. If you have priorities that don’t align with the standard financial planning model, consider offering services or a revenue model that’s more aligned with your goals.

2. Focus on What Interests You

While there are plenty of valuable certifications and programs, if your only goal is adding letters to your name, you’re wasting your time. Instead, focus your education on an area that interests you. Most financial advisors have a niche that especially speaks to them. Yours may be anything from options trading to helping a client going through a divorce. If a designation is available within your area of interest, that’s great, but don’t limit your education to what’s covered by designations or certifications.

Especially when you’re starting out, throwing money at anything that may attract clients is hard to turn down, but at the end of the day, knowing your business inside and out will help more than an alphabet soup behind your name.

3. Who Your Target Client Is

It may sound counterintuitive but focusing your energy on a narrower client base is almost always better than casting a wide, generic net. 

Defining a target client doesn’t mean you’re limited to someone who exactly fits your target, but it can help you make decisions about your services, marketing, branding, etc. For example, if your target client is a millennial doctor or lawyer, a speaking event with retired baby boomers probably isn’t the best use of your time. 

You’ll want to consider your target clients’: 
 • Age 
 • Occupation 
 • Income level 
 • Life stage 
 • Financial needs and priorities

4. How to Maintain Strong Relationships with Existing Clients

Finding new clients is one of the hardest parts of life as an independent advisor. Especially when you feel the pressure building to bring in new clients, you may find yourself putting all your energy there, to the detriment of your current clients. 

Besides the fact that supporting your clients is part of the job of an advisor, and therefore the right thing to do, it’s also a good business strategy. The more satisfied your clients are, the more likely they are to recommend you to their friends or family members. Additionally, keeping an existing client is far cheaper than finding a new one. 

Whether the client is one you’ve worked with for years who followed you to your new practice, or a brand-new client, one of the best ways to keep clients satisfied is to communicate. Older clients may wonder how the change will impact them, while newer clients may not have previous experience working with an advisor. No matter the circumstance, communicate expectations with clients, making sure to be as specific as possible.

Topics to discuss include: 
 • How often will you meet? 
 • How can they reach you outside of face-to-face meetings? 
 • How quickly will you respond to clients? 
 • How will you and your client handle market corrections?

5. What Realistic Expectations Look Like

Starting a financial planning practice is not easy. That doesn’t mean it’s not worth it, but the more realistic your expectations are upfront, the more likely you are to succeed. 

First of all, it’s highly unlikely that all of your clients will follow you. People simply don’t enjoy change, and most major wirehouses make it easier for clients to stay than follow their current advisor. No matter how satisfied your clients seem, if you’re expecting all or even most of them to follow you, you’ll likely end up disappointed. 

There are also income expectations to consider. Almost every new advisor will need to dip into savings for a while. To make sure you have enough, crunch the numbers using your most conservative estimates. How much do you expect you’ll need to take from savings, at most? Now add at least 25% more. While you should hope for the best, when you’re running your own business, you have to prepare for the worst. At the very least, knowing you have plenty of additional cushion can help you sleep easier. 

Finally, you need to set realistic expectations on your time. The best way to do this is to focus your energies and figure out how to get the best return for time invested. A great way to do this is to track your time. While this itself may take a little extra time, knowing how and where you spend your time and how it is or is not converting clients is a great way to work more efficiently and effectively.

6. All the Hats You’ll Wear

When it comes to realistic expectations on time, you’ll also need to consider all the hats you’ll be wearing. Once you’re on your own it’s your responsibility to handle admin tasks, IT, marketing, and compliance. 

While you may be working on a limited budget in the beginning, you’ll also need to be honest with yourself on what you can and cannot handle on your own. Is it worth saving a few dollars at the risk of being out of compliance? Once you begin making a profit is that money better spent going into your pocket or towards hiring someone to help with admin tasks? The key to answering questions like these is to keep the big picture in mind.

The Takeaway

Branching out on your own comes with plenty of benefits, but it’s not easy. If you’re considering starting your own advisory practice, you’ll want to spend as much time as possible preparing beforehand to give yourself the best possible chance for success. 

One way to make life easier is with Presults automated email archiving, specifically designed to meet the compliance needs of Advisors.