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Advise Your Clients About Identity Theft

Strengthen your relationship with your clients—and help them guard their money and good credit—with these guidelines.

By Kirk Okumura

There are many ways for clients to lose their nest eggs: lawsuits, an underinsured home, a lack of disability income insurance or life insurance, poor investment decisions, and so forth. But one growing threat to your clients’ financial well-being is identity theft. Since 2001, the number of identity theft complaints filed with the Federal Trade Commission has nearly tripled from 86,000 in 2001 to more than 246,000 in 2004. Part of the value you can provide your clients is alerting them to the dangers of identity theft and recommending ways to reduce exposure to it and limit the damage it causes.

Identity theft includes the unauthorized use of a person’s name, Social Security number, credit card, driver’s license, bank account or personal identification number (PIN). The results can be devastating for your client: loss of money, damaged credit ratings and even being arrested for crimes the client did not commit. To add insult to injury, the process of correcting the damage may take months or even years, and require an outlay of money, sometimes substantial.

Identity thieves ply their trade in both high- and low-tech fashions.

Identity thieves ply their trade in both high- and low-tech fashions. High-tech methods include hacking into a server that stores consumer information, and creating spoof Internet sites and email scams that ask for personal information and passwords. But the greater threat continues to be the low-tech methods of rummaging through the trash (from homes and businesses), finding or stealing wallets and purses, and intercepting financial statements and credit card offers in the mail.

Steps clients can take
Unfortunately, there is no way to prevent identity theft altogether. However, your clients can reduce their exposure by taking several precautions:

  • Safeguard and avoid disclosing forms of identification such as Social Security number, date of birth, driver’s license and mother’s maiden name.
  • Consider using a post office box or a locked mailbox or mail slot to receive mail at home.
  • Limit the number of credit cards. Cut up any unused credit cards. Travel with the fewest number of credit cards as possible.
  • Use a crosscut shredder to shred documents containing personal information, including such items as credit card receipts, bills and applications; utility bills; phone bills; and other similar documents.
  • Use passwords and PINs that are a mixture of lowercase and uppercase letters and numbers. Avoid using family members’ names, birthdays, pets’ names and so forth as passwords.
  • Avoid maintaining passwords and PINs in any form that someone could access them.
  • Take appropriate precautions when using the Internet, including using firewall, spyware and virus-protection software; using PayPal (to minimize the number of vendors who have credit card information); conducting business with reputable firms; and not responding to emails asking for personal information.
  • Opt out of preapproved credit card offers by calling 888-567-8688 or via the Internet at

Likewise, your clients can take steps to limit damage through early detection. Recommend to your clients that they always review monthly bank, credit card and brokerage statements for accuracy and report problems without delay. They should consider online statement and bill-paying options that financial institutions provide when possible. In addition, they should order copies of their credit report each year.

Your clients can take steps to limit damage through early detection.

Free credit reports
Thanks to an amendment to the federal Fair Credit Reporting Act, each of the three national consumer reporting companies (Equifax, Experian and TransUnion) are required to provide consumers with a free copy of their credit report, upon request, once every 12 months. A good strategy is to order a report from one of the reporting companies every 4 months. Direct clients to, the only authorized online source from which to request these free reports.

If identity theft occurs, instruct your clients to contact the fraud department of any one of the three major credit bureaus, the police and the Federal Trade Commission. In addition, they should contact the appropriate entities, depending on the information stolen. For example, if a Social Security number is stolen, clients should contact the Social Security Administration. If a credit card is stolen, clients should contact the credit card company.

As a financial advisor, you are in a key position to help your clients become aware and take appropriate action against the growing threat of identity theft. In doing so, you reinforce their view of you as a professional who cares. Failure to give advice on identity theft will mean having to answer two questions that are lethal to a client-advisor relationship: “Did you know about this potential hazard?” and “Why didn’t you tell me?”

Kirk Okumura is an LUTC author and editor with The American College. Contact him at


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