Figuring Out Financial Apps
RETIREMENT SERV ICES
Rapidly evolving technology has given millions access to a level of fi nancial service previously reserved for
wealthy investors working with personal advisors. The benefi ts have been tremendous: The average credit
score in the United States, for example, has risen to 695, up from 688 a decade earlier, a fact driven largely
by increased use of online credit monitoring services1. In the retirement space, 401(k) service providers report
better risk-adjusted investment performance for those using online advice, even accounting for additional fees.
But the downside of convenient digital tools includes the risk of making a mistake with self-service advice and the
unintended exposure of your personal data. The keys to maximizing the value of technology while managing the dangers
include fi nding the right application for your needs, managing your data’s exposure, and knowing when to trade your
robo-advisor for human expertise.
THREE KINDS OF FINAPPSFinancial services apps (FinApps) cover a wide variety of subjects, ranging from those narrowly focused on fi nancial issues
like retirement or student loans, to those that factor in multiple account types to calculate values like net worth or tax
obligations. Generally, though, they can be categorized into three broad groups:
In many cases, these applications are interactive. A money management tool, for example, may export account data for
use by tax preparation software or import information from an investment advice program to track progress toward a
savings goal. How interactive and easy to use they are depends on the level of sophistication. Programs range from off-
line calculation engines that allow a user to enter data for a one-time result to online “screen scrapers” that can access
bank, investment, credit card, and other account types to collect and analyze fi nancial information. While the latter tends
Focused on budgeting and
banking.
Helps plan for debt
reduction and savings
goals.
Allows for bill paying and
account reconciliation.
MONEY MANAGEMENT SOFTWARE1
Focused on calculating tax
obligation.
Provides access to the
most current IRS forms and
rules.
Validates calculations based
on built-in algorithms.
TAX PREPARATION SOFTWARE2
Focused on asset allocation
and security selection.
Provides access to
investment research.
Forecasts account growth
in different market
scenarios.
INVESTMENT ADVICE SOFTWARE3
1Techcrunch.com, April 2016
2
to be easier to use, offers more complete insight, and updates information at near real-time, the increased sophistication
comes with greater risk of exposing personal fi nancial information to hackers and identity thieves.
Individuals considering the purchase or use of a personal fi nance program need to think carefully about how they plan to
use the service, the level of complexity they are willing to navigate, and the degree to which they feel comfortable data
sharing between their personal accounts and online services. And, when thinking about data sharing, it is important to
remember that just because an application is “read only” and does not execute transactions, that does not mean it is safe
from hackers. Clever criminals can use that information to construct phishing (fake emails) and other malicious strategies
to trick users into revealing passwords or other sensitive information.
BIG DATA MAY MEAN BIG RISKSHewlett-Packard reports the daily discovery of more
than 10,000 new malware threats targeting the Android
system. And even Apple’s App Store, often considered
the paragon of technological safety, experienced its
fi rst spyware exposure in 2015 when 4,000 apps
were contaminated by a maliciously modifi ed version
of Apple’s Xcode2. More recently, ethical “white hat”
hackers from NowSecure tested the security protocols of
32 FinApps. Ten apps received a “Warn” rating, meaning
trivial data could be accessed. Eight of the apps failed
the test altogether.3 Unless FinApp users are cautious,
they risk exposure of not only personally identifi able
information, including Social Security numbers, birth
dates, and addresses; but also loss of passwords that
could give thieves access to their fi nancial accounts.
Users of FinApps can reduce their risk by accessing apps
from reliable sources such as their retirement account
service provider, bank, or credit card company. These
institutions often perform additional security validation
on apps before recommending them. Downloading apps
from a reputable provider also helps avoid fake apps, a
major source of malware that allows criminals to take
over a user’s device.
AVOIDING DIGITAL DOLLAR DANGERS
Passwords, passwords, P@s$w0rds!FinApp sites typically encrypt passwords to protect them from hackers. That can’t help, though, if a device isn’t locked and if the app automatically logs on when accessed. Be sure to lock your device anytime it is left unattended and require a password to open it. Never use the auto log-on features with FinApps and choose complex passwords with a combination of capitalization, numbers, and non-alphanumeric characters.
Protect your phone.Most people install anti-virus software on their computers, but many don’t think to do so on their phones. Several antivirus software development fi rms, like Norton, supply mobile device versions of their software. Think, too, about your Wi-Fi access. While public access is convenient, it also can make your phone vulnerable. If you must access your accounts in public, try to use cellular data, make sure your screen is not visible to others, and log off as soon as possible.
Listen to your provider.Reputable FinApp developers understand security’s importance and will publish information about how they protect your data. Look for reference to 128-bit bank level or 256-bit military level encryption and verifi cation of security protocols by third parties such as TRUSTe, VeriSign, and MacAfee. Additionally, many FinApps tied to accounts monitor for unusual activity. They will send users texts or emails about suspicious purchases or money movement that should be immediately investigated and confi rmed.
2Risk Management Magazine, June 20163VeteransUnited.com, December 2016
3
EXPERTISE STILL MATTERSFinApps can greatly enhance information monitoring and
analysis, but they can’t substitute for thorough fi nancial
planning. In addition to standard “how to” help, many online
services also offer at least phone access to a human being
with fi nancial advice expertise. These people can ask probing
questions, propose new ideas, and generally help customers
create a holistic fi nancial strategy. The application and online
tools then serve to help watch how well the users stick to the
plan and make progress toward goals.
The more complex a person’s fi nancial situation is, the more
important it may be to consult an expert. For example, if
your employer offers multiple wealth-building benefi ts such
as a Health Savings Account, a 401k plan, and a stock purchase plan, a trained advisor can help navigate decisions about
what accounts to fund and by how much. Similarly, for people with multiple fi nancial goals such as managing down debt,
saving for retirement, and funding a child’s education, an expert can help weigh the pros and cons of different account
types, forecast timing and savings amounts, and estimate the tax implications of different choices. Traditionally, these
services were expensive, but FinApp automation has reduced the cost of talking to a professional and made access to
expertise more widely available.
When working with a human alongside a FinApp, be sure you understand how the advisor is paid—by product
commissions, through additional fees, or as part of the online service price you are already paying. If access to advice
from a human being is included as part of the FinApp’s fee, be sure to understand whether there are any limits before
engaging the person so that you can maximize the value. For example, some services allow you to speak to an expert,
but only for a limited time before additional fees kick in. In such a case, users would want to begin the call prepared with
fi nancial statements and specifi c questions at the ready.
More people than ever before have access to quality, affordable fi nancial advice thanks to advances in
technology. To make the most of these services, understand the risks, be clear about your objectives, and
know when to ask for help. A good place to start is with a call to your retirement plan service provider or a
visit to their website. Find out what your employer has already made available to you through your retirement
savings plan.
© 2017 Lockton, Inc. All rights reserved. KC: 26204
The communication is offered solely for discussion purposes. Lockton does not provide legal or tax advice. The services referenced are not a comprehensive list of all necessary components for consideration. You are encouraged to seek qualified legal and tax counsel to assist in considering all the unique facts and circumstances. Additionally, this communication is not intended to constitute U.S. federal tax advice, and is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code or promoting, marketing, or recommending any transaction or matter addressed herein to another party.
This document contains the proprietary work product of Lockton Financial Advisors, LLC, and Lockton Investment Advisors, LLC, and is provided on a confidential basis. Any reproduction, disclosure, or distribution to any third party without first securing written permission is expressly prohibited.
Securities offered through Lockton Financial Advisors, LLC, a registered broker-dealer and member of FINRA, SIPC. Investment advisory services offered through Lockton Investment Advisors, LLC, an SEC-registered investment advisor. For California, Lockton Financial Advisors, LLC, d.b.a. Lockton Insurance Services, LLC, license number 0G13569.
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