Basic Electronic Communication Safety

Tragically, there are countless stories of victims losing their entire life savings to texting/phone/email schemes. Adding to this is the evidence that many of the scammers are from forced labor situations. The best way to avoid becoming a victim is to adjust OUR BEHAVIOR. Do NOT respond.

You should never respond to unsolicited texts or unsolicited conversations about loans or investments or money. If you do get caught in a scam, your best defense is to NOT feel embarrassed and get out as soon as you can, even with a loss.

Before making investments, reach out to AIKAPA or a knowledgeable trusted person for a second or third opinion. Ideally you will be able to ignore these types of contacts.

If it becomes clear that it is a scam, then file a complaint on the FBI’s Internet Crime Complaint Center (IC3): https://www.ic3.gov. If it is related to crypto assets, then also report it to cryptofraud@usss.dhs.gov and the Secret Service will refer your email to an appropriate field office for immediate action.

Edi Alvarez, CFP®
BS, BEd, MS

www.aikapa.com

Schwab Alliance Platform & Cyber Security Updates

The transfer from TDAI to the Schwab Alliance platform has been completed and I wanted to provide you with an update. We are still experiencing longer delays to complete tasks on the Schwab platform (than we did on the TDAI platform) but we have started to see improvements.

We have noticed that Schwab likes to email and send mailers far more often than we experienced when TDAI was the custodian. I would like to double down on my usual recommendation that you NOT click on hidden links within emails – Schwab appears to send many emails with hidden links. You could instead log into your Schwab online account directly and address Schwab’s emailed request. Our concern stems from potential spoofing of both the email and the Schwab website. Our priority should be to keep your Schwab Alliance login credentials safe and secure so that we can maintain digital safety of your portfolio. To do so please be sure you only log in using the Schwab legitimate website and from a safe electronic device.

Mid-January, Schwab sent an email to those who participate in the Schwab sponsored individual 401k plan regarding a new ROTH 401K plan feature. This is good news but for now, please ignore it. We can discuss how it works at our next meeting particularly if it might be useful for your financial plan.

If you are having difficulty logging into the Schwab Alliance website, please let us know. If you have not yet logged in to the Schwab platform then you will begin receiving paper reports in April unless you log into your account before March 27, 2024.

Edi Alvarez, CFP®
BS, BEd, MS

www.aikapa.com

AI and Data Analytics – new SEC rules in 2024

At end of July, the SEC approved a plan that they say will root out conflicts of interest that can arise when financial firms use Artificial Intelligence (AI) to serve clients. They are also improving rules requiring companies to disclose serious cybersecurity incidents within four business days of any significant breach.

I would be more impressed if these were required for all technology firms that handle customer data analytics (not only financial firms).

The SEC asserts that the new regulations will ensure that ‘predictive data analytics is used to optimize services that better serve clients’ and not for the benefit of the financial firm. Banks and brokerage firms are typically using AI for fraud detection and market surveillance, but recently the shift has been made to have AI and analytics as part of trading recommendation, asset management, and lending. This is a huge development with serious implications for consumers. The goal of the new regulation is to ensure that biases are not ingrained in the technology algorithm, particularly since many vendors and consumers accept technology output, as fact, without human verification.

In this vein, The Federal Trade Commission (FTC) has opened an investigation into Microsoft Corp – OpenAI Inc (the creator of ChatGPT) to examine what risks the chatbot poses for consumers . . . these programs are written by humans and can extend biases and discrimination.

The ideal ‘responsible innovation’ in technology is appealing but so is responsible capitalism or governance and we are currently not doing well in any of these areas.

AI has the potential to draw on reams of data to target individual investors and nudge them to alter their behavior on trading, investing, borrowing, or even opening financial accounts for them. Many of the new tools can be transformative in our time, and I would love to use them. Even so, we should be leery about the concentration of this technology and powerful data in the hands of only a few firms which can pose a huge risk for future stability in financial markets.

It is important that we not provide our private data to technology or analytics software that is not yet fully tested and regulated from unregulated companies. We need to continue to demand that regulations be developed to ensure the safety of our data and particularly add controls for how for-profit firms can use our data. I am particularly concerned when I see errors in financial software output that are accepted as correct because they are software generated.

Edi Alvarez, CFP®
BS, BEd, MS

www.aikapa.com

A Cyber Security Reminder

Almost every day we hear about financial fraud. Scam artists are getting more sophisticated and skilled at separating people from their money. The latest innovation stems from the rapid development and dissemination of AI human voice simulation software tools. With just a small digital sampling, scammers can now easily mimic your voice over the phone. At AIKAPA we are fortunate that we know you more deeply and as individuals. An AI voice tool could sound like you but wouldn’t know enough to bypass our verbal verification process. Together by following best practices, we can keep you and your hard-earned money away from scammers.

Best Practices

  • Be suspicious of unexpected or unsolicited phone calls, emails, and texts asking you to send money or disclose personal information. If you receive a suspicious call, hang up, then call the firm or organization back using a contact number such as the one provided on the back of your client card or official statement.
  • Phone numbers and email addresses can easily be spoofed to imitate legitimate organizations. Be cautious with email communications because your email can be compromised and used to facilitate identity theft.
  • Do not disclose on social media personal or sensitive information, such as your birth date, contact information, and mother’s maiden name.
  • Be extremely cautious when receiving money movement instructions via email. Call the sender at a known or verifiable contact number (not the number provided in the email or solicited over the phone) to verbally validate all instruction details before executing a transfer or providing your approval.
  • Do not click on hidden email links or on unknown attachments – Malicious links provided in emails can introduce damaging spyware or ransomware into your computer system. Hover over the link and scrutinize the file path name to identify the source. If it appears at all suspicious (e.g., contains grammatical errors, typos, or personal names), do not click on the link. Verify an attachment before opening it.
  • Check your email and account statements regularly for suspicious activity. Suspicious activity includes email communications you don’t recognize or verification of a request for changes.
  • Do not verbally disclose or enter confidential information on a laptop or mobile device in public areas where someone could potentially see, hear, or access your information. This is particularly important if you are using the electronic device for financial transactions.
  • For all money transactions, prepare ahead – you are most vulnerable when in a rush and more likely to click on a link or accept a phone number in an email.
  • Verify payment requests you receive by phone or email. Requests for payment using gift cards, prepaid debit cards, or digital currency are frequently associated with fraud or scams.

Finally, you should request and review your credit history report annually (not your credit score). The credit history report from all three credit agencies should only show accounts and addresses that belong to you. Immediately report any new addresses or accounts that you don’t own.

Edi Alvarez, CFP®
BS, BEd, MS

www.aikapa.com

SEC’s Office of Investor Education and Advocacy Alerts

The SEC made these recommendations to prevent fraud and avoid certain vulnerabilities. I agree and have added a comment when appropriate.

  1. Investors should not make any investment decisions relying solely on information from social media platforms and apps. Best to email us and research outside of the platforms/device.
  2. SEC states that celebrities and millionaires, and influencers are paid to make investment recommendations on social media and investors should not be swayed by these testimonials or celebrity endorsements. This applies even if they are not paid. It is surprising how many can be swayed when enough fame surrounds a topic.
  3. Find and verify the identity of the underlying source. Particular attention paid to slight variations in the email address, screen name, account name. Only contact a broker/advisor with a number listed on the SEC website or from the advisor ADV/agreement. If in doubt, contact us.
  4. Though a verified account (like Instagram, Twitter, LinkedIn) can help towards some authenticity. You are encouraged to verify all information outside of social media. These ‘verifications’ are not regulated.
  5. If you receive a message from an advisor recommending that you buy a specific investment, then first contact them directly (outside of social media) to ensure they were the source of that recommendation. Do not invest your hard-earned dollars based on an app or an online conversation.
  6. Be aware that there are many crypto scams that promise high investment returns with rapid increase and touted as having little to no risk. Any time you see little or no risk, STOP, this is likely fraud since crypto has real risks.
  7. Do not share your financial information or identity when in a new romance. Your SSN, DOB, passport, bank accounts are the keys to your financial life and electronic identity – protect them. If travelling be wary of a travel romance that accelerates quickly into financial involvement or marriage.
  8. Be cautious of postings from social media accounts that have minimal history or a history of reporting company stock prices. It is common to do ‘pump and dump’ strategies through social media (remember that I described ‘pump and dump’ mailing strategies a few years ago – these are just online versions of the old scams). These are most common with Penny Stocks since they are easily manipulated.

Let us know if you encounter any financial product before you purchase them. Sometimes it is not a fraudulent product but one that is not ideal for your long-term goals.

Edi Alvarez, CFP®
BS, BEd, MS

www.aikapa.com

Cyber-crime, Phishing, Robocalls, and Wanting to do Good

Almost every day there is an article in the news about financial fraud. Much of it impacts seniors, like the telephone scam now doing the rounds that has fraudsters posing as Social Security representatives. However, we are all at risk, especially if we believe we are too young, too smart and too vigilant to fall for a scam. Sadly, scam artists are very sophisticated, intelligent, and focused so that they’ve become experts at separating people from their money. Only last month, “Shark Tank” magnate, Barbara Corcoran, was tricked out of nearly $400,000 through an email phishing scam in which fraudsters convincingly posed as her assistant.

A lot of financial fraud targets seniors or those in high pressure situations because cognitive agility decreases as we age or when we are stressed. Furthermore, seniors who live alone are particularly vulnerable.

Here are several things you can do to protect yourself and loved ones from financial fraud:

  1. Simplify your financial life. One of the best things you can do to reduce the chances you’ll be taken advantage of is to reduce the number of accounts you have and the number of financial institutions you work with. Fraudsters are experts at catching people off guard, posing as others and making their prying questions sound both reasonable and plausible. Make it a habit not to respond to phone calls regarding finances unless you know the person at the other end and never trust emails involving finances without first verifying the source.
  2. Limit access to and block large transactions. The first step in preventing fraud is to limit the money that can be easily accessed by not keeping large sums in checking accounts. Keep large accounts with a separate institution so that it takes a day or two to make a transfer. Next, if your bank allows it, set alerts for large transactions or block transactions over a certain size. Always use a credit card for online purchases since they give you the ability to reject a charge, while your debit card will automatically pay from your account.
  3. Always use maximum security on email accounts that you use for financial communications. We’ve seen most cyber fraud through yahoo.com and gmail.com accounts prior to the additional security currently available.
  4. For large transfers, particularly during hectic times, involve a trusted financial partner and NEVER accept changes to the receiving account and contact over email (or a call from someone you don’t know). It is better to halt the process entirely or at least confirm with a known financial entity than to change course midstream during a cash transfer. Most of the successful fraudulent transfers have been during escrow for a new house purchase or sale. The methods used are creative and ever improving.
  5. Families should plan their spending ahead and NOT respond to charitable requests on the fly. It is not unusual for seniors to receive many robocalls and mail requests from real charitable organizations because they know that seniors want to do good. It is not unusual for seniors to spend more on charitable donations made ad hoc than was planned. Make a point never to donate based on a phone call or last-minute request at a checkout unless that is part of your charitable plan for the year. I recommend families sit together and come up with an annual plan for charitable donations. When charitable opportunities present themselves defer them for review at your next family charitable giving gathering.
  6. For seniors or those facing high stress situations, you may want a backup notification sent to your spouse, financial caretaker, or a trusted person for high value transfers. If your bank does not provide for such alerts, then make it a standard practice never to make high value transfers without extensive planning and verification.
  7. For seniors, it’s important to have a potential financial surrogate in place long in advance of cognitive decline. Identify a trusted family member or friend or trusted professional to be your financial caretaker and start conversations long before you feel you need to turn over your finances. Consider providing view-only access to a trusted person so that they can help you monitor your account activity and be notified of large transactions and suspicious activity. It is a good idea to involve them with your tax preparation and filings as well.
  8. Due to the number of data breaches in recent years (that have exposed thousands of people’s Social Security numbers and other sensitive data), it has become increasingly possible for fraudsters to open accounts in another person’s name. On a regular basis, personally monitor your credit history with all three major credit agencies for new activity that you didn’t initiate.
  9. I’m personally uncomfortable with ongoing Credit Freezes unless you can monitor and implement them yourself at minimal cost and without involving a third party. Using a credit monitoring service is not recommended since you are involving an unregulated third party and, in any case, will only alert you after you’ve been victimized. The recommended approach when this happens is to freeze your credit at all 3 major credit agencies. Keep in mind that though this is often recommended by cybersecurity experts it can become a major hassle for you. Freezing your credit can be an issue for you if a company needs to legitimately verify a transaction with your credit history (this is the case for some insurance and bank transactions). Unfortunately, freezing your credit is sometimes the only way to prevent attempts to open a new account in your name, and maybe the preferred or only option for seniors.

Financial fraud is rampant. However, with a bit of preparation, a support system, and communication, you can significantly reduce the odds that it happens to you and your love ones.

Edi Alvarez, CFP®
BS, BEd, MS

www.aikapa.com