RETIREMENT
In addition , land conservation programs can sometimes be used to provide income so that the landowners will not be forced to sell to a developer , Williams says .
“ Working out these specialized potential conflicts takes an advisor with knowledge of the industry and empathy for the client ,” Williams says .
The key to success for both generations is to plan early and have in-depth discussions with family members about what is expected of everyone , says Carol Goetsch , senior product manager at RBC Wealth Management . “ The advisor has to determine what the cash needs of the retiring generation will be and how to maximize Social Security benefits , assuming they have paid into the Social Security system .”
Some companies have developed innovative products and services to boost clients ’ retirement preparedness . For instance , RetireOne , an insurance product provider , has collaborated with Pension & Wealth Management Advisors , a registered investment advisor in Waltham , Mass ., on a strategy called the Pension & Wealth Management Advisors ’ Portfolio Income Insurance Program . The product is a model portfolio that comes in the wrapper of a contingent deferred annuity . It provides downside protec- tion , but the company says it ’ s also unlike an annuity because the portfolio does not come under the administration of an insurance company .
“ If you have a risk-averse client , staying in cash may provide peace of mind , but it will ultimately disadvantage them over time ,” says George P . Webb , CEO of Pension & Wealth Management Advisors . “ By setting a floor of income with the contingent deferred annuity , we have an innovative tool for boosting clients ’ confidence and getting them out of cash . Further , we can transfer market risk in their portfolios to an insurance company without moving the asset .”
Parting Shot continued from page 60
world ’ s most stable financial services businesses , enjoying some of the highest retention rates in any industry . Clients retain their advisors for decades because of the trust they place in them to protect wealth and to always put client interests first .
But good luck keeping a client if their money is gone and there is nothing that can be done about it . The same goes for other clients who learn what happened , especially if there ’ s publicity from an inevitable lawsuit . Moreover , when a cyberattack occurs , there are usually multiple victims . If they happen to be clients of the same firm , the legal , financial and reputational damage is magnified .
Equally problematic is the fact that custodians are likewise not liable if a cyber theft results from a wealth manager being breached . That becomes a matter between the firm and its client . If a firm is breached and money is stolen from client accounts , it is on the wealth manager .
How many firms have ever disclosed this to their clients ? Most have no idea this risk even exists .
Certainly , large numbers of industry participants carry some sort of cyber insurance . However , the policies almost invariably have exclusions from losses resulting from the gross negligence or willful misconduct of the wealth manager and its key employees .
More simply stated , should someone at a wealth management firm make a
Good luck keeping a client if their money is gone and there is nothing that can be done about it . The same goes for other clients who learn what happened , especially if there ’ s publicity from an inevitable lawsuit . single exception to the company ’ s cyber policies and it results in a breach that causes a loss of client assets ( when millions are at stake ), that breach is effectively uninsured . Good luck explaining what happened to clients — as well as to the SEC .
All of this points to why the owners of wealth managers need to wake up to the silent killer threat that cyber poses to their organizations . At a minimum , every industry participant needs to disclose and educate their clients about the bargain that they are agreeing to with their custodians and banks as well as with their advisors .
Finally , because a breach can severely damage a firm even if the intrusion was caused by the client ’ s negligence or action ( and not the advisor ’ s ), wealth managers have an overwhelming self-interest in helping clients better understand and manage their cyber risks . How clients operate online is their own business . But when their behavior creates significant risks to businesses that wealth managers have spent decades building , advisors have no choice but to get involved .
The SEC estimates 75 % of all wealth managers have already been targeted in a cyberattack . Seventy-five percent of participants surveyed at the most recent T3 conference admitted doing next to nothing about cybersecurity . At the same time , cybercrime is forecasted to double again in the next three years ( according to various sources ). At this rate , the industry may soon look like a hospital cardiac unit .
MARK HURLEY is CEO of Digital Privacy and Protection ( DPP ).
CARMINE CICALESE , COL ., U . S . Army retired , is senior advisor and partner at DPP .
JULY / AUGUST 2023 | FINANCIAL ADVISOR MAGAZINE | 55