As the holiday shopping season comes to a close and clients make last-minute charitable gifts before year-end, financial advisors can and should help keep clients wise to the increasing danger of instant payment fraud.
Today, instant payment options are everywhere — offering individuals the flexibility and ease of completing some of the more mundane but necessary everyday tasks.
As our parent company is a bank, I have been speaking with banking colleagues to understand better how advisors can help their clients.
As a firm, we have observed the concerning uptick of digital fraud through instant payments as a real risk, especially when money is willingly sent to scammers.
As we round out these high-spending and donating months, educating clients and balancing the benefits of technology with a human touch can better mitigate this rising risk.
In that respect, financial advisors (and their counterparts in broker-dealers, custodians, and clearing firms) have a lot of agency to safeguard their clients against fraud. Still, they need to begin speaking with their clients about better identifying these issues, flagging irregular behavior, and helping stop financial crime in its tracks.
The Need to Move With Speed
There is an expectation and demand in the market today to move money faster and more efficiently. Perhaps surprisingly, some of the biggest digital fraud concerns today stem from individuals unknowingly, yet willingly, sending money to someone scamming them.
Yet there is a double-edged sword to consider: While some mistakes are easy to undo given their digital ledger, fraudsters are also moving with similar speed and savvy — ready to sequester stolen money into untraceable accounts in minutes or seconds. Indeed, a 2023 Federal Trade Commission report shared that complaints specific to Zelle scams had surged by 86% year-over-year.
Education Is Essential
An advisor's ability to connect with clients on a personal level often starts and evolves with their ability to be good storytellers. Educating them through anecdotes remains an effective way to build rapport while keeping them safe.
Over the past few years, thousands have fallen victim to Zelle scams, where they are conned into sending money to an unauthorized recipient or providing personal information to a criminal disguised as a bank employee. The fraudsters on the other end of the transaction are sophisticated, moving the money as quickly as possible out of the bank once it has hit their account.
