5-minute Finance: Protect Clients From Common Financial Pitfalls

By DAMON S. WINTER 

A few months ago, one of my clients asked to transfer a large amount of money out of his account into his personal checking account. This specific request seemed odd, so I investigated further and realized he’d been the victim of a scam via the internet. Unfortunately this is just one example of common financial pitfalls to which many people fall prey. It’s our duty as their trusted advisors to guide and protect clients by educating them about financial best practices they can apply to mitigate future risk.

Keep Them Secure

If you can keep your clients up-to-date on trending scams or recent cons with a resource like the FBI Scam and Safety page, you’ll provide them a huge advantage. The website includes an entire section dedicated to prevention of common fraud schemes and tips for online security. Learn about cons local to your area or specific to your client demographic. Scammers often prey on the elderly, so let your senior clients know they can contact you if they have doubts about any unknown mail, suspicious activity on their account or large transactions.

Another simple way to keep clients safe is to suggest that they stop using their debit card. Lost or stolen debit cards have a much higher liability compared to credit cards. If a credit card is lost, the credit company is at risk, not the client. Money stolen from a debit card, however, is difficult if not impossible to recover.

Guard Their Credit Score

Recommend your clients regularly monitor their credit score. An unknown inquiry is a red flag and should alert them that there’s unauthorized activity on their account. There are multiple free monitoring services, such as Credit Karma, that are efficient and easy to use. If a client has several accounts and cards, they should consider investing in a paid monitoring service which provides a more in-depth perspective and power of attorney if there’s a breach.

While advising them on credit score monitoring, take some time to also explain how to protect their credit and why it is important. You’ll be surprised by how many people aren’t aware of the effects of a credit score in their daily life. They might realize they need good credit to borrow money or buy a house or car, but they’re probably unaware that a bad score can lead to bad insurance rates. In addition, employers take credit scores into consideration when checking a prospective employee’s background, so it could impact their likelihood of getting a new job.

Unfortunately, most people don’t know what actually alters their score. Provide your clients with easy, tangible tips to improve a bad score or maintain an excellent one. For example, people are often tempted to use their credit card to pay rent every month, as they usually receive a percentage of cash back. However, this can actually have a negative impact on their credit because they’ll always have a large, outstanding balance. If they’re able to, have them pay rent two months at a time, leaving one month with a zero balance. They’ll be shocked at how much their credit score skyrockets.

Broaden The Conversation

A good time to inform clients of financial best practices is during their annual review, since you’re already discussing their financial security. Educate them about recent insurance scams and ways to be mindful of cons. From there, you can broaden the conversation to monitoring their credit score as well as ways to guard their good credit. They’ll be grateful you took the time to invest in them and provide them guidance that’s easily applicable to their daily lives. Ultimately, you’ll have a satisfied, well-protected client base who are confident in their financial security.

Damon S. Winter LUTCF®, CFS®, FSCP®, RFC® is co-Founder of OnMark Asset Management, LLC, a boutique financial planning firm in Lake Oswego, OR. Damon, who offers Securities and Advisory Services through KMS Financial Services, Inc, is a Life & Qualifying Member of MDRT and Past-President of the Northwest Oregon chapter of the National Association of Insurance and Financial Advisors. He can be reached at [email protected].