Financial Advisors and Institutions: Protect Client Data from Cyberattacks

Cyberattacks can take various forms, ranging from phishing and social engineering scams to malware attacks and ransomware infections. These attacks can lead to the theft of client information, disruption of operations, and reputational damage for advisors and institutions. In addition to direct financial losses, cyberattacks can also result in regulatory penalties and legal liabilities for failing to adequately protect data.

"LPL Financial’s Advisor Information Security team is at the forefront of threat detection and prevention," said Tuffy Haines, senior vice president, Security Operations. "We use best of breed technologies and best practices to stay ahead of evolving cyber risks."

One of the best ways to safeguard client data and prevent financial losses is to stay vigilant by recognizing and responding to cyberattacks.

Recognize and Respond to Phishing and Social Engineering Attacks

Phishing and social engineering attacks often involve deceptive emails, unsolicited phone calls, or contact via social media. They’re designed to trick individuals into revealing sensitive information, such as account numbers or personal identification details. Bad actors may impersonate a trusted person or brand or pose as a government agency or authority figure. They often appeal to emotions such as fear, sympathy, curiosity, or greed and convey a sense of urgency. 

Never click on links or open attachments in suspicious emails. The 2024 Data Breach Investigations Report noted that 68% of breaches involved a personal falling victim to a social engineering attack or making an error. It also found that 62% of financially motivated cybersecurity incidents involved ransomware or extortion.^*

Here are some common types of social engineering attacks:

• Email phishing: deceptive email that appears to be from a trustworthy source
• Spear phishing: phishing that targets a specific individual, usually one with privileged access to sensitive data or accounts
• Vishing: voice-based phishing attack through phone calls to deceive victims, often done via impersonation
• Smishing: Smishing: social engineering phishing attack that occurs via text message
• Quishing: scanning a QR code from your mobile device that leads to a malicious website
• Scareware: malware that uses fear to manipulate victims into sharing sensitive information
• Ransomware: malware that pushes victims to send money to regain access to their stolen data, accounts, or devices

Before taking action, ask yourself:

• Am I acting too quickly? Should I vet this request or message?
• Is this email from an unknown or untrusted source? Is it safe to click links or open attachments?
• Have I verified the source that’s requesting sensitive information or passwords?

Defend Against Ransomware and Cyber Scams

Ransomware attacks continue to pose a threat with the potential to cause significant financial and reputational damage. They involve encrypting sensitive data and demanding a ransom payment in exchange for its release. In recent years, these attacks have become increasingly sophisticated, targeting financial firms due to the valuable client data they hold.

To protect against this threat, financial advisors should implement robust network security measures, such as firewalls and intrusion detection systems. Regular security audits and vulnerability assessments are also crucial for identifying and addressing potential weaknesses. Maintain up-to-date antivirus and anti-malware software and ensure that all software is patched regularly to address known vulnerabilities.

It's also important to recognize and avoid these common cyber scams:

• Charity scams often occur following a natural disaster or during the holiday season. They use high-pressure tactics appealing to emotions. To stay safe, only donate to reputable organizations, avoid hard-to-trace donations (like cash or gift cards), and verify text message donation numbers on the charity’s official website.
• Gift card scams trick individuals into purchasing gift cards for fraudulent purposes due to their difficulty to trace. These scams can occur through various methods such as fake emergencies or impersonation, often using urgency to deceive victims. To protect yourself, never use gift cards as a form of payment to others and resist scare tactics by taking time to evaluate and verify requests.
• Click each link to learn more about protecting yourself from these schemes:
  
  
  • Holiday scams
    
  • Tech support scams
  • Romance scams
  • Investment scams

Incident Response Planning: What to Do If Breached

Financial advisors and institutions should develop a comprehensive incident response plan (IRP), outlining steps to be taken in the event of a cybersecurity incident, including containment, eradication, and recovery measures. By having a well-defined plan in place, you can respond quickly and effectively to cybersecurity incidents, minimizing the impact on client data, reputation, and business operations.

Here are key elements to include in your IRP:

• Define clear roles and responsibilities for key team members involved in incident response, including the incident response team, IT department, legal counsel, and senior management. Assign specific tasks and decision-making authority to ensure a coordinated and efficient response.
• Establish clear communication protocols to ensure timely and accurate information sharing among the incident response team, clients, regulators, and other stakeholders. This includes establishing a designated point of contact for handling inquiries and providing updates on the incident status.
• Implement data recovery procedures to minimize the impact of a breach and restore operations as quickly as possible. Regularly test and update these procedures to ensure they’re effective.
• Conduct regular security audits and risk assessments to identify vulnerabilities and ensure compliance with industry standards, FINRA rules, and SEC requirements. Use these findings to prioritize security investments and strengthen your overall cybersecurity.
• Educate employees about the importance of cybersecurity and their role in protecting sensitive data. Provide regular training on cybersecurity risks, best practices, and incident reporting procedures.

How LPL Can Help

No matter how you affiliate with us, LPL is committed to helping financial advisors, institutions, and our teams protect sensitive information. Our Advisor Information Security team is available to answer your questions, provide consultations and training classes, walk you through potential gaps in policy, share best practices from across the industry, and help coach your firm and IT provider on the best steps to stay secure.

Haines said, "Our commitment to safeguarding sensitive information allows financial advisors and institutions to operate with confidence, knowing that their clients' data is secure."