January 29, 2025
Key takeaways:
- Training and awareness: Implement ongoing training programs that cover phishing scams, the latest cyber threats, and security best practices.
- Regular security audits: Conduct periodic vulnerability assessments to identify and address potential security gaps.
- Incident response plan: Develop detailed protocols for promptly informing all stakeholders about an incident and ensuring a coordinated, effective response.
- Cyber insurance: Use cyber coverage as a strategic tool to access expert resources and support during a cyber crisis.
- Vendor management: Review and update contracts with managed service providers (MSPs) to ensure they include comprehensive security measures.
A family office manages vast wealth, high-value financial transactions, and sensitive personal information, making it a prime target for cybercriminals. But because many family offices are operated by teams who deeply trust each other, they often mistakenly believe their entity is less likely to be targeted than other businesses or large corporations.
This misconception, coupled with limited cybersecurity measures and a lack of proactive planning, can leave family offices vulnerable to devastating cyberattacks.
According to a survey from RSM, most single-family offices (71%) are only somewhat confident about their ability to prevent a cyberattack. Understanding the risks and adopting proven best practices will help family offices stay ahead and better protect the financial interests of high-net-worth families.
Unique vulnerabilities of a family office
Experienced, trusting teams are the foundation of most family offices. While this fosters collaboration, it can also create blind spots and means that team members are much freer in sharing sensitive information across hackable channels.
Unlike larger organizations that may have dedicated security teams, family offices often outsource IT and cybersecurity and can struggle to keep up with emerging technologies and system upgrades. Notably, 62% of family office survey respondents said they find delivering best-in-class technology in-house to be challenging. Additionally, they tend not to consider themselves a target.
Combined, these factors create an environment ripe for insider threats and overlooked vulnerabilities. If attacked, cybercriminals could have access to the treasure trove of sensitive data family offices handle daily, including:
- Financial account details
- Social security numbers and personal identification information
- Investment strategies and asset inventories
- Transaction details
- Family secrets and private correspondence
Common cybersecurity threats for family offices
A family office is not that different from a corporate environment when it comes to the types of threats it faces. The risks are growing.
Approximately one out of four family offices surveyed by JP Morgan (24%) said they have been exposed to a cybersecurity breach or financial fraud. The biggest threats facing family offices include:
- Phishing and social engineering: Cybercriminals no longer send obvious fictitious mails. Instead, they craft convincing, tailored messages. These sophisticated schemes impersonate trusted vendors, executives, or family members to manipulate employees into clicking malicious links, sharing sensitive information, or redirecting large payments to offshore accounts.
- Ransomware attacks: Malicious software can encrypt data, holding it hostage until a ransom is paid, often in cryptocurrency.
- Invoice and financial fraud: High-value transactions are prime targets for attackers looking to intercept or alter payment details.
- Data breaches: Personal and financial data, even the location of valuable assets like artwork, can be leaked and exploited during a cyberattack.
Best cybersecurity practices for family offices
Protecting your family office from cyber threats requires a proactive and layered approach. By combining education, technology, and clear policies, you can significantly reduce your exposure to risks and enhance your team’s ability to respond effectively.
The following measures will help you stay ahead:
Review and update managed service provider (MSP) contracts
Many family offices rely heavily on MSPs and outsourced IT services for all things technology. MSPs often handle IT needs but may not focus on robust security measures. Family offices need to clarify what their contracts cover and ensure inclusion of security-specific services.
Develop clear policies and incident response plans
When asked what they would do during a cyberattack, many family offices don’t have a documented, comprehensive response plan. Delays in response and being reactive can exacerbate the damage. To mitigate this, work with experts to:
- Establish a cybersecurity response plan outlining steps to take in case of an attack.
- Assess vendor access to your systems and regularly audit their security measures.
- Conduct penetration testing and identify vulnerabilities.
- Create and enforce a comprehensive data privacy and security policy to ensure compliance and transparency.
Provide training
Family office employees often lack the training to identify phishing attempts or implement secure processes for financial transactions. Thorough, regular training can equip staff to:
- Recognize phishing emails and deep-fake social engineering tactics.
- Use dual-authorization protocols for payments.
- Be mindful of what they share on social media — a common reconnaissance tool for attackers.
Implement strong technological safeguards for essential defense
- Engage in timely patching to update software and systems and close security gaps.
- Utilize advanced endpoint security solutions and antivirus tools to detect, monitor, and mitigate threats in real time.
- Use data encryption for sensitive files and emails, particularly those related to financial transactions. Use separate channels for decryption keys.
Leveraging cyber insurance
Many family offices view cyber insurance as a financial safety net only useful for reimbursement. In reality, robust cyber insurance policies serve as proactive risk management tools and an invaluable resource for navigating attacks. Family offices often don’t realize the FBI can’t always help recover stolen funds unless it’s a national security issue. That’s where insurance can step in.
Here are a few things a comprehensive cyber policy can provide:
- Incident response support: Immediate access to forensic consultants and legal advisors to mitigate damages and comply with regulatory requirements.
- Data recovery services: Experts to recover encrypted or lost data from backups.
- Ransomware assistance: Resources to handle ransom payments securely and legally, including access to Bitcoin wallets and negotiation experts.
- Public relations guidance: Help managing reputational damage through transparent and compliant communication with affected parties.
Carefully evaluate your family office’s specific needs and work with an expert to tailor a policy to support your organization in a cybersecurity crisis.
Make cybersecurity a priority for your family office
Cyber threats to family offices are growing and evolving every day. The stakes are high. Security measures are no longer optional. It’s not just about reacting to attacks; it’s about being ready when they come.
By understanding the risks, incorporating appropriate insurance coverage, and implementing best practices, family offices can build a resilient defense strategy that protects their wealth, privacy, and legacies against cybercrime.
Want to learn more?
- Find Allen Blount on LinkedIn.
- Connect with the Risk Strategies Cyber Risk team at cyber@risk-strategies.com.
- Connect with the Risk Strategies Private Client Services team at privateclient@risk-strategies.com.
- Access all the Private Client Blogs & Risk Resources
- Explore: Managing Your Legacy with a Family Office
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