Financial Services Casting Nets For Younger Pros as Advisors Age Out

It’s no secret the investment industry has a choppy record in attracting young financial talent.

But with 100,000 brokers retiring in the next ten years, and half the industry talent age 55 or higher, according to a report from Cerulli Associates, some industry titans have had enough, and are actively recruiting much younger advisors.

Unfortunately, that may be an uphill climb, experts say.

“Young people don’t want to work in financial services because advisors’ websites mostly feature older white men – they see it as boring,” said David Edwards, president of Heron Wealth, a registered investment advisory firm based in New York City. “Or, they’ve seen ‘Wolf of Wall Street’ and think that financial advising is just ‘pumping and dumping.’”

'Grow With Your Clients'

Edwards points to companies like Oxygen Financial and his own firm as rare examples of investment companies that “get it” when it comes to landing younger advisors.

“While our bread-and-butter clients today are boomers and our oldest advisor is 55, much of our marketing is directed to GenXers or even Millennials,” he explained. “Our two youngest advisors are in their 30s. We give them mentoring and support, but we get them in front of clients right away. Right now, our training process is built around ‘grow with your clients.’”

Read full article at InsuranceNewsNet.com

 

Heron Wealth selected by Expertise as one of the 15 Best New York City Financial Advisors

Expertise Looked at 1,944 Financial Advisors in New York City and Picked the Top 15. They scored financial advisors on more than 25 variables across five categories, and analysed the results to give you a hand-picked list of the best financial advisors in New York, NY.

Says Expertise: Heron Wealth of New York City helps clients plan for their financial futures, grow their assets via investment strategies, and secure a strong financial future for family members who will outlive them. The firm gets to know its clients on a personal level and offers continuous education and guidance when it comes to budgeting for life’s transitional periods such as having a child, changing careers, or setting up an inheritance. The firm offers financial planning services that can help clients save money for short-term needs, invest with long-term goals in mind, budget for large purchases such as a home, and enjoy life while also planning for retirement.

Read the entire article here.

 

How one financial adviser lands seven-figure accounts

5 steps that goosed wealth advisor David Edwards’ growth to 30%-40% a year

Do you know the “three-foot rule”? Wealth adviser David Edwards, president and founder of Heron Wealth, which provides financial planning, investment advice and estate planning to individuals and families across the U.S. and in Europe, cites it as one key element of his success.

In a nutshell, the rule says that whenever you’re within three feet of someone, you should talk to them about your business and the services you provide. Being able to network is a skill that can help any adviser thrive — and in Edwards’ case, the three-foot rule has landed him a handful of multimillion-dollar accounts.

Previously a one-man shop growing assets at a 5% annual rate, Edwards transformed his fiduciary wealth management firm by adopting a “hyper-productive” team approach that has been growing assets under management 30%-40% annually. Heron Wealth grew from $122 million in assets in January 2013 to $285 million through February 2017.

Here’s how he does it.

Read the full article at MarketWatch

 

8 Things Not to Hide From Your Investment Professional

Silent or sneaky investors can sabotage their most valuable financial relationship.

Some adult shame amounts to little more than a grown-up version of hiding an empty cookie jar. But too often, the adult piggy bank is at stake. For financial managers, that can set the stage for disaster. "You cannot have trust if the client is withholding information or not telling the truth," says Mark Astrinos, a Palo Alto, California-based memver of the American Institute of CPA's Personal Financial Specialist Credential Committee. "Sometimes clients are embarrassed by their behavior," Astrinos adds. "Other times they don't want to share this information in front of a spouse." Here are eight details never to keep secret from your financial team.

Secret stashes can mean double trouble for advisors. David Edwards, president of Heron Wealth in New York City, relates this story:

"We had a situation last year where we routinely made the minimum required distribution from a client's retirement assets - only to learn he had a 'secret' retirement account from which he'd already calculated and drawn the funds."

Edwards scrambled to return the unnecessary distribution to the account as a 60-day rollover. "Even then, the client had to do extra work to report the rollover for tax filings."

Read all 8 tips at US News & World Report

 

To Build Assets Fast, Don’t Be Timid

Being gregarious can go a long way in growing your business, as MarketWatch columnist Marie Swift explains.

She cites the example of David Edwards, president and founder of Heron Wealth, in New York. The $285-million firm has grown assets 30% to 40% annually since 2013, largely because Edwards goes to prospects rather than waiting for them to come to him.

Edwards has landed multiple seven-figure clients by following the “three-foot rule,” which dictates that whenever you’re within that distance of someone, you should talk to them about your business and the services you provide.

The advisor makes a point of going where ideal clients are likely to be. That means on the water — Edwards sails competitively — or on the ski slopes, for instance.

He’s careful not to talk shop right away. Instead, he asks good questions and listens for a need to be articulated. Edward converses with about 100 potential clients a month, but is focused on those who have a financial issue or pain point that needs to be resolved soon or that they see coming down the road.

Edwards admits that his exuberant personality helps. In a day and age where so many advisers sit in their offices pushing paper or social media posts, the adage “always be social” — both in person and in digital forums — has special meaning for Edwards. “You won’t catch any fish if you don’t go to the fishing hole,” he concludes.

Read full article at Barron's

 

Trump tax proposal leaves advisers in the dark on estate tax repeal

The broad-brush tax proposal released Wednesday by President Donald J. Trump repeated his campaign pledge to repeal the estate tax, but failed to provide financial advisers with any additional detail regarding its form.

That leaves advisers in estate-tax limbo, which they've largely been in ever since the prospect of a broad tax-reform package gained steam following November's presidential election.

The estate tax is a federal 40% tax levied on estates exceeding $5.49 million for individuals and roughly $11 million for married couples. Estates receive a step-up in tax basis at death, which dilutes the impact of paying capital-gains tax on inherited assets.

The federal tax raised $17.1 billion for the government in 2015. Many states also levy their own taxes, the asset thresholds and percentages of which vary.

A wealthy, elderly client of David Edwards, president of Heron Financial Group, passed away in January this year, and her estate is on the hook for a few millions dollars in tax. If the federal estate tax is repealed this year, that bill could disappear.

"I told them so far, 'Don't count on it,'" Mr. Edwards said.

Many observers expect an estate-tax repeal as part of any tax-reform package — which in and of itself isn't guaranteed, due to Democratic opposition and potential opposition from hardline conservatives who are loath to balloon the federal deficit.

Mr. Trump is, among other things, calling for a reduction in the corporate tax rate to 15%, a lowering of the top marginal income tax rate to 35%, and doing away with the alternative minimum tax.

An estate-tax repeal could take a variety of forms that would have different planning implications.

Observers note, though, that the estate tax would likely reappear in 10 years' time, even if it is repealed.

This is because Republicans would need several Democrats to support tax legislation in order to achieve a supermajority — 60 votes — and avoid a filibuster, something observers believe is unlikely due to philosophical disparity between both parties regarding taxes.

"The Democrats are dead set against it. It's dead on arrival as far as they're concerned," Mr. Edwards said.

Read full article at InvestmentNews

 

Use the "3 foot rule" to land seven-figure accounts

Do you know the "three-foot rule"? Wealth adviser David Edwards, president and founder of Heron Wealth, which provides financial planning, investment advice and estate planning to individuals and families across the U.S. and in Europe, cites it as one key element of his success.

In a nutshell, the rule says that whenever you're within three feet of someone, you MUST introduce yourself and get a conversation started. Being able to network is a skill that can help any adviser thrive -- and in Edwards' case, the three-foot rule has landed him a handful of multi-million-dollar accounts.

Here's how he does it.

"I had the best vodka and soda of my life at a high-end bar in London last year" Edwards says as he recalls how, using the three-foot rule, he began a conversation with a man from North Carolina who was enjoying a cold beverage in that same bar.

"I introduced myself asking what brought him to London," Edwards said. "We chatted about various topics, eventually talking about what I do. He told me that he was looking to change financial advisors but that it might be a while since he was going through a nasty divorce. We exchanged business cards and I followed up with him a month later. Long story short, he ended up investing $2 million with my firm."

Go where ideal clients gather or are likely to be: Edwards makes sure he has "outposts" in places he loves and would be frequenting anyway -- even if he weren't a wealth manager always seeking new clients for his growing New York City-based business. For instance, Edwards competes in sailing regattas from New England to the Caribbean and coaches a hometown team in New York Harbor. "I hang out in places where my ideal clients are likely to be -- the ski slopes in Utah, polo matches in the Hamptons, sailing regattas in the Caribbean," Edwards said.

"I even talk to younger prospects - HENRYs -- high earners, not yet rich -- at Heron's cooperative workspace in Manhattan where, with just a little bit of conversation and chutzpah, I identified two very good potential clients for one of my younger wealth managers. It's amazing what just rubbing elbows can do. While most people are sitting in the corner looking at their phones and tablets, I reach out and engage people as they refill their water bottles and grab a fresh cup of coffee."

Read the full article at Morningstar

 

Spark growth by adopting top-to-bottom segmentation strategies

Advisory firms are trying to figure out how to leverage their networks and technology to profitably expand their client bases.

Client segmentation strategies can provide that opportunity when firms align their resources properly.

David Edwards, president of and wealth adviser at Heron Financial Group in New York, is a proponent of segmentation, or dividing the client base into different market segments and deploying different service models to serve each market.

“Our bread-and-butter clients today are baby boomers,” he says. “But if our client base is only people 55 and older, 10 or 15 years from now, we won’t have a very valuable firm as those clients spend down their assets in retirement.”

Consequently, Heron Financial Group is signing on Generation Xers and millennials to widen its client base, Edwards says.

The firm is also trying to bring in African-American clients and same-sex couples and trying to recruit advisers to specifically serve these markets.

Based on income, the demographics at Heron Financial break down this way: Executive families and business owners with $1 million to $10 million in assets generally work with Edwards. The next two segments include high-earning but not yet rich clients -- dubbed “HENRYs” -- who are 25 to 39, and female professional clients, ranging from 35 to 60.

“You cannot be all things to all people. Firms must decide whether to focus on individual or institutional clients and target asset levels,” Edwards says.

“We don’t go after client families with $25 million because our service package is not equipped for the needs of families at that level,” he says.

See the full article at Financial Planning

 

Student Loan Debt and How It Affects Young Workers

Some students take drastic steps to avoid student loan debt. For example, GoFundMe college campaigns solicit funds from friends, family members and perfect strangers, while income share agreements allow students to attend school for free if they commit to pay a percentage of their post-graduate income to investors.

Despite all that, federal student loan defaults topped 1.1 million in 2016, and according to a new survey by American Student Assistance, student loan debt is a heavy weight on young workers. The survey – which includes responses from workers between the ages of 22 and 33 as well as responses from human resources managers – reveals the following:

The negative effects of student loan debt on young workers:

  • 56% worry about repaying their loan either all the time (26%) or often (30%).
  • 40% report that worrying about their student loans has impacted their health.
  • 55% would like to go to grad school but couldn’t take on any additional student loans.
  • 61% have considered getting a second job to help pay off their student loans.
  • 54% of young workers report that right now, paying off student loans comes first, and they will put off saving for retirement until later.

Read the entire article at GoodCall.com.

 

Advisors Need To Do Due Diligence Before Buying New Technology For Firm

In the old days, before the iPhone, a financial advisory firms could get away without updating their technology every year, but not anymore. As consumers go mobile, they expect advisors to be up-to-the-minute with the latest technology. Almost everyone uses the web or mobile technology and expects to get info on a 24/7 basis. If an advisor isn't providing that service, they can be sure their competitors are.

But with all the tech tools out there, how do advisors sift through the clutter to determine which tech products and systems help financial advisors compete and which ones don't?

"Before you buy a new technology make sure the process is sound and that you're not automating something stupid," said David Edwards, president of Heron Wealth, an RIA in New York City. "If you have a bad operations set up or a bad marketing set up, bringing in technology won't make it better."

Is It Better, Faster or Cheaper?

Edwards makes a commitment to replace his technology every four years, and attends the Technology Tools for Today conference every February to keep up to date. He also has three criteria for purchasing new technology. First, is it better, faster and cheaper than something he already has. Second, does it integrate with his current system and current custody platform and financial planning platform, which are all tied together. The final criterion is security.

"We've had vendors that were not maintaining their platforms with current standards for cybersecurity, which is so important," said Edwards. "All the data that a bad guy needs is neatly packaged inside our systems. We need the highest level of encryption with duel factor authentication."

Read the full article at Investor's Business Daily.

 

Fidelity’s New Robo Ups Ante for Advisors

After launching its robo for retail investors last summer, Fidelity Investments is forging ahead on a revamped technology platform for advisors. By mid-year, the asset manager and financial services custodian expects to offer its 3,000-plus customer base of RIAs and brokerages a whole new set of online tools to manage client portfolios.

“We’re making some important changes here – this is a completely different platform from our retail (Fidelity Go) service and comes with several new features,” says Gary Gallagher, head of Fidelity Institutional’s digital-advice services group.

The revisions are part of a broader effort to refresh Fidelity’s entire Wealthscape platform – the custodian’s general “gateway” for advisors to tap into a range of different digital account management and client reporting features.

“Taken as a whole, our technology platform is being designed so that advisors have the option to seamlessly transition their online clients at a later date to become full-service customers,” Gallagher says.

David Edwards, president of Heron Financial Group, counts himself as one long-time Fidelity customer who is very interested in the AMP upgrade.

“One of the nice features of their new robo is that we’d be able to use it to plug and play into our core eMoney financial planning software,” says the New York-based advisor, whose firm manages $295 million.

Edwards, though, observes that as many as 20 different vendors are offering robos that in various forms could be adopted for institutional purposes.

One such robo he’s considering is powered by Riskalyze. This spring the developer of investment-risk-assessment software is planning to launch a new generation of its original Autopilot robo package.

Read the entire article at Financial Advisor IQ.

 

What millennials can teach us about credit

I was recently quoted in an article for CreditCards.com, one thing they left out that is worth noting: yes, use a credit card every month, but pay off the full balance every month as well. And always remember the most important thing, a credit card is NOT an emergency fund!

Debit trumps credit for younger millennials

A 2016 survey by TD Bank found that on average, Americans make $4,700 worth of purchases each year with their credit card, and just $2,400 with cash, checks or debit card. By comparison, millennials do the bulk of their spending – or $5,200 – using a debit card, check or cash, and make just $3,300 in credit card purchases.

That debit versus credit preference gets flipped as millennials age. Older millennials, age 25-34, are the most likely group to use credit cards, at 83 percent, versus the runner-up baby boomers at 78 percent, a 2016 FICO survey found.

Younger millennials often “don’t know it’s a good idea to have a credit card and use it,” says Samantha Gorelick, a 34-year-old wealth adviser at Heron Financial Group in New York. “It doesn’t have to be an either/or situation.”

Even something as simple as opening up a credit card and linking your Netflix account to it can help you build credit, Gorelick says.

Having a good credit history and credit score is important if you want to own a home or take out another type of loan, she says. The higher your score, the lower the interest rate you’ll get – which means you’ll pay less.

Read the entire article at CreditCards.com.

 

Are Tech Solutions Starting to Match Advisor Desires?

David Edwards spoke with Murray Coleman recently: Financial technology has come a long way – even over the last year!

Transcript:

MURRAY COLEMAN, REPORTER, FINANCIAL ADVISOR IQ: Hi, this is Murray Coleman with Financial Advisor IQ. I’m here today with David Edwards, President of Heron Financial Group in New York. And David, you’re seeing signs that the technology opportunities that a lot of people talked about last year are finally starting to show up in the market today, correct?

DAVID EDWARDS, PRESIDENT, HERON FINANCIAL GROUP: Absolutely. I was just at the annual T3 Conference – Technology Tools For Today – in San Diego about three weeks ago. And my observation was that all of the technology that was promised in 2016 is being delivered in 2017.

MURRAY COLEMAN: What are some of the most promising technologies that you’re seeing?

DAVID EDWARDS: The area where we’re most excited is the rollout of the Wellscape platform from Fidelity. One of the issues that we struggle with is the cost and expense aggravation of integrating a half-dozen or more applications within our own systems, and what Wellscape is promising to us is, number one, taking over certain functions such as fee generation and performance reporting that we currently work with other vendors. And then two, better entire integration with both the technology investors and the custodians.

MURRAY COLEMAN: Well, what else are you seeing out there on the market besides what Fidelity is doing?

DAVID EDWARDS: There wasn’t anything in particular this year that made me say, huh, I must buy this right away. One of the things that we’re looking for intently is a robo-platform that our portfolio manager will use – not our clients – that incorporates our models and our platform of funds. And so Riskalyze has a tool that’s heading in that direction that will be coming out in the April-to-June time frame, and we’re going to be eagerly testing that to see if it will work for us.

MURRAY COLEMAN: Any other robos out there that are interesting to you or are you being very particular at this point in what you want?

DAVID EDWARDS: In 2015 and 2016, we spent a lot of time evaluating the consumer-facing robos. That would be BettermentPersonal CapitalWealthfront, et cetera. And we chose one platform, and we spoke to a number of our clients to find out if they wanted to use it. And the answer was no, they did not want to use it at all.

MURRAY COLEMAN: Well, was it because it just wasn’t easy enough to move around in or was just not –

DAVID EDWARDS: It was pretty easy in the sense that changing the oil in your car is easy. But as far as our clients were concerned, that’s our job, not theirs. I certainly have met plenty of people that do use the robos happily. They’re never going to be our clients. They don’t need the personal touch to have to do it themselves.

MURRAY COLEMAN: How about any CRM software advances or just broad-based portfolio management software?

DAVID EDWARDS: We’re Redtail users, quite satisfied with that. It does a good job at a low cost. We asked for a couple of enhancements, which we might see in six months or so. Well, for example, whenever we create a task for a client, an email goes out to all the team members that are associated with that task. All right. Cool. Well, the email that comes across says "Email from Redtail Technology," and the subject line is "Email from Redtail."

Well, it doesn’t take a lot of effort to change that so that the sender is me or one of my team members and the subject actually is the subject. Right now, I have to scroll down the page to find out who it’s from and what it’s about. And that doesn’t sound like a big deal until you look at hundreds of items per day, oftentimes on your phone. So a lot of enhancements that we’re looking for are what we call user experience. How can I do this faster and easier than I’m doing it right now?

Let me actually address the topic that I’m pressing our vendors about, which is making the process of routine operations easier for my clients. What I mean by that is if you going into Amazon and you routinely buy stuff, eventually you discover there’s an order feature that lets you scan down past orders, say, oh yeah, I need more protein bars, one click, and it’s on its way.

Well, there’s about 475 forms that I can use with my custodian, and each one is between one to four pages long, filled with legalese. But the client doesn’t care about that in the slightest. If the client wants to journal money from their individual cap to their IRA account for their annual distribution, why should I have to send them a four-page form that they may or may not be able to print off, may or may not be able to use a signature, certainly when it’s on their phone? Why can’t I just let them log into the "Custodians" platform at Fidelity.com or Wellscape or eMoney, and click 'I approve.' Our clients understand that. They don’t understand four-page forms.

MURRAY COLEMAN: Makes sense. How soon do you think it will show up?

DAVID EDWARDS: I first raised this issue about 18 months ago with Fidelity, who is our primary custodian, and Fidelity is an amazing firm. But all these things take time, because resources have to be dedicated, programmers assigned, budget found. And most importantly, the cybersecurity has to be rock solid. So I think I might start to see what I’m looking for in about 18 months.

MURRAY COLEMAN: Well, thank you very much for your time today.

DAVID EDWARDS: Awesome, Murray. Bye.

Watch the Video at Financial Advisor IQ

 

Spark growth by adopting top-to-bottom segmentation strategies

Advisory firms are trying to figure out how to leverage their networks and technology to profitably expand their client bases.

Client segmentation strategies can provide that opportunity when firms align their resources properly.

David Edwards, president of and wealth adviser at Heron Financial Group in New York, is a proponent of segmentation, or dividing the client base into different market segments and deploying different service models to serve each market.

“Our bread-and-butter clients today are baby boomers,” he says. “But if our client base is only people 55 and older, 10 or 15 years from now, we won’t have a very valuable firm as those clients spend down their assets in retirement.”

Consequently, Heron Financial Group is signing on Generation Xers and millennials to widen its client base, Edwards says.

The firm is also trying to bring in African-American clients and same-sex couples and is recruiting African-American advisers.

Read the entire article at On Wall Street.

 

Firm Goes from “Lifestyle” to Turbo in Four Years

With financial advisors challenged by evolving consumer expectations and the sheer weight of demographics, it’s not surprising wealth management software maker eMoney Advisor would put the spotlight on a financial advisor who has used its technology to boost his annual growth rate sevenfold in four years.

In a new case study, eMoney tells how advisor David Edwards took his New York-based RIA Heron Wealth from $65 million under management six years ago to $285 million now. By another measure, Heron Wealth went from a yearly growth rate of 5% to nearly 35%.

Edwards achieved this mainly by upping his technology game and turning his attention downstream to capture high-earning-not-rich-yet individuals — a.k.a. “henrys.”

In this light, says Drew DiMarino, head of sales for Radnor, Pa.-based eMoney, Edwards “is the exact example of what advisors should be doing in 2017.”

But as you might expect, there’s more to Heron Wealth’s recent growth than a technology upgrade and a new business plan.

The truth is, Edwards had been keeping his firm on a slow-growth path on purpose. From its founding in 1996 until about five years ago, he ran it as solo “lifestyle” practice so that he could be available to his kids as they grew up. “School plays, practices, I didn’t miss single thing in 18 years,” he tells FA-IQ.

Read the entire article at Financial Advisor IQ

 

Heron Wealth Uses Automation and Streamlined Process to Build "Bionic Advisor" Service Model for Emerging Investors

eMoney Advisor's Technology and Support Opens New Markets for Fast Growing New York-based Advisory Firm

NEW YORK, March 8, 2017 /PRNewswire/ -- David Edwards, founder of Heron Wealth, a New York-based fiduciary investment advisor and wealth management firm, today announced the release of a detailed case study focused on the successful automation of his firm published in conjunction with financial technology company eMoney Advisor (eMoney). The eMoney report reveals how Edwards, previously a one-man shop growing assets at a 5% annual rate, transformed into a hyper-productive team growing AUM 30-40% annually.

Heron Wealth grew from $122 million in assets as of January 2013 to $285 million through February 2017.

"We plan to double assets over the next three years, and double again within seven years to $1 billion.  We will continue to deliver the high touch experience our clients expect, but also derive the revenues necessary to support our continued investment in human capital, technology, cybersecurity, compliance and operations," added Edwards, who was also recently featured on the cover of Financial Planning magazine in a story related to technology advancements that protect his clients from cyber threats.

Read the entire article here.

 

How Heron Wealth Protects Clients'​ Financial Data

David_Edwards_Heron_Weath

Every four years, Heron Financial Group completely tears down and rebuilds its technology platform.

One big focus: A review of how every vendor handles clients’ private data, says David Edwards, head of the New York-based advisory firm.

Not all contracts are renewed.

“We’ve told vendors, 'We can’t work with you anymore because we’re not confident our data is secure,'” Edwards says. “They don’t like it, but there it is. We’re fiduciaries. That means protecting your client against every threat.”

To ensure client data safety, Edwards says advisers must scrutinize contracts signed with vendors, conduct regular follow-ups, have a cybersecurity policy in place and even purchase cybersecurity insurance.

“Everything needed for identity theft is neatly packaged within your own computer systems,” Edwards says. “That’s why we go through that process of up-armoring everything we do.”

Advisers, Edwards says, have to commit to staying on trend with best practices in technology, and they also have to commit dollars.

“You cannot hide from this,” he says. “The upside to not spending on data and cybersecurity is that you’ll save money. But the downside is that, if there’s a breach, you’ll be gone in an instant.”

Read full article at Financial Planning

 

What will the estate tax look like under Trump?

While it's clear that President Donald J. Trump wants to scrap the estate tax, it's not clear what financial advisers should be telling their clients as details about the law's demise get sorted out.

Mr. Trump has suggested he wants to eliminate the controversial federal estate tax as part of a larger tax plan. While details are sketchy, he has raised the idea of replacing the estate tax with a capital gains tax imposed on inherited assets. Meanwhile, the gift tax — another popular estate-planning tool — likely will remain intact, experts say.

Oh, just one more thing: All this will likely change in 10 years.

Some advisers, such as David Edwards, president of Heron Financial Group, say the estate-tax limbo is already affecting clients' financial planning.

One of his clients died Jan. 3, and that client's $800,000 estate-tax bill is now “a question mark,” he said.

Mr. Edwards is telling the client's beneficiaries that payment of New York state's estate tax is inevitable, but the federal tax levy is unclear. If Mr. Trump repeals the tax this year, it would likely be retroactive to the beginning of 2017, so the client's estate may not be on the hook for federal tax.

Read the entire article at Investment News

 

Don't let this data breach threat end your business

Every four years, Heron Financial Group completely tears down and rebuilds its technology platform.

One big focus: A review of how every vendor handles clients’ private data, says David Edwards, head of the New York-based advisory firm.

Not all contracts are renewed.

“We’ve told vendors, 'We can’t work with you anymore because we’re not confident our data is secure,'” Edwards says. “They don’t like it, but there it is. We’re fiduciaries. That means protecting your client against every threat.”

From all sides, independent advisers are told that, to stay current, they must integrate the latest technology tools into their practice. They hear regular warnings, too, about cybertheft schemes and protecting their businesses against malicious electronic attacks.

Few advisers, however, are cautioned about the risk they face when plugging in those same tools. An exposure of client data can trigger tough regulatory action and costly lawsuits, not to mention reputational harm, even if the firm wasn’t the source of the error.

It’s not just hackers or a rogue employee RIAs have to be vigilant about. In its annual report on data breaches, Verizon deemed unintentional breaches so common that it created a category for them: miscellaneous errors. Verizon counted over 11,300 incidents last year, with almost 200 confirmed breaches. In a majority of cases, a client discovers personal data has been made public before the firm does. The financial sector suffered over 1,300 data breach incidents last year, Verizon says.

Read the entire article at Financial Planning.