Retirement Plans Resource Center

Wealth Dimensions Quarterly Commentary – April 2014

In the first quarter of 2014, the Federal Reserve had a changing of the guard, as Janet Yellen became the new Fed Wealth Dimensions Newsletterchairman replacing Ben Bernanke. Equity markets nervously awaited this transition with the S&P 500 sliding 3.56% in January, but recovering 4.31% in February and another 0.69% in March, as Yellen reassured the markets that the Fed would not deviate from current policy. Overall, the first quarter ended with the Dow slightly down with only small gains in the NASDAQ, S&P and Russell 2000. The bond market responded positively to Yellen’s initial comments and posted modest gains for the quarter. Economic indicators gave mixed signals throughout the quarter, and many analysts speculated that the challenging winter weather had a negative impact on business that would not last.

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Meanwhile, a major political event created further volatility and angst, as events in the Ukraine have raised the specter of a renewed Cold War with the US over Russia’s annexation of Crimea. Additionally, NATO leaders accused Russia of fomenting unrest in other areas of eastern Ukraine and contemplating a takeover of these regions under the pretext of protecting the ethnic Russian populations. Russia has amassed 40,000 troops along the border, and NATO leaders have stated that a takeover could be launched within 24-48 hours. The United States and other western nations have responded with economic sanctions against Russia in an effort to discourage further action by Putin. This standoff presents a potential economic threat, as further Russian aggression could destabilize global politics, threaten European energy supplies and cause a slowdown in European economies that could spread beyond Europe.
In spite of our brutal winter and Putin’s act of aggression, the markets remained rather calm. As such, we are turning to an issue that has caught our attention-the burgeoning problem of identity theft, a threat to your financial security and peace of mind.

Identity TheftIdentity Theft

Almost daily, there is a new report of a major data breach, computer virus, phone scam or other form of identity theft. In today’s world, it is almost impossible to do business and not expose personally identifying information—names, addresses, Social Security numbers, credit card numbers or other account numbers—with stores, restaurants, financial institutions, health care providers, schools, employers and many others. If this information falls into the wrong hands, it can put you at risk for identity theft. Security analysts suggest that virtually everyone will become a victim at some point.

Identity theft continues to be one of the fastest growing crimes in the United States and has become the number one form of property theft. According to the Federal Trade Commission, identity theft was the top consumer complaint for 2013, with the vast majority of complaints resulting from fraudulent use of credit cards. As thieves become more sophisticated, new areas of fraud are emerging. Last year, over one-third of the complaints related to the fraudulent filing of tax returns or wage-related matters.

As prolific as identity theft has become, it often goes unreported, and the crimes that are reported are rarely investigated. Local police place a low priority on cyber-crime, which is a difficult and expensive crime to investigate and prosecute. The general response from those charged with doing so is that pursuing cyber-crime is a futile endeavor and thus little is done about it.

Merchants are generally content to clean up the damage from an attack, rather than pay for better preventive measures, although with the recent “headline risk” experience during the holiday season at Target, this might be starting to shift. Consumer pressure on businesses they patronize is likely the greatest influence on companies to get serious about security.

The reality, according to cyber-security experts, is that it is easier and safer for an identity thief to steal $50,000 worth of credit card numbers than to shoplift an inexpensive item from a store.

How Do Thieves Obtain Information?

Identity Theft - FingerprintWhile there are countless different fraud threats, virtually all of them center on obtaining your private identifying information. The scammers use techniques as overt as copying credit card information at a restaurant to phishing emails, making fake IRS or credit agency phone calls, stealing mail or simply going through your trash.

Thieves are looking for any type of personal information that will help them gain access to accounts, apply for credit or simply make purchases.

  • User names, passwords and PIN numbers
  • Driver’s license, passport and Social Security numbers
  • Phone and utility account numbers
  • Bank and credit account numbers, expiration dates and security codes
  • Employment, student and professional identification numbers
  • Insurance identification numbers
  • College or university financial-aid form information

While we are aware to varying degrees of identity theft, two recent schemes are less familiar and more worrisome.

Tax Refund Fraud

Tax Refund FraudTax refund theft is a growing problem, as scam artists find new and creative ways to steal your identity. Once they have your information, they create a fake tax return with a W-2 and withholdings and request a tax refund via direct deposit or pre-paid debit card from the IRS be mailed to their address. Once complete, the bank account will be closed or the debit card will be cashed out before you or the IRS catches on. Victims learn of the scam when their legitimate return is rejected as already having been filed. It can take six months or more for the IRS to sort this out and give you the refund that is rightfully yours.

Tax theft has become such a big issue that the government has assigned thousands of employees to the problem and has developed new detection and prevention procedures. An audit by the Treasury Inspector General for Tax Administration found that the IRS processed 1.1 million potentially fraudulent tax returns for 2011, including 5,500 fraudulent returns filed by a single tax preparer—for a total in refunds of nearly $27 million—and payouts of $490,000 to an address in Bulgaria that was listed on more than 700 tax returns! The IRS’s vigilance to this issue is showing results, as the IRS has caught 12.6 million suspicious returns, amounting to $40 billion in refunds over the last two years.

Unfortunately, as quickly as the IRS shuts down one scam, another presents itself. Just this month, the IRS warned taxpayers on its website about a new email phishing scam that claims to be from the IRS Taxpayer Advocate Service informing taxpayers of a processing error with their 2013 tax return. The email directs them to click on links for information about the so-called advocate assigned to the case. The links, however, lead to non-IRS web pages that seek personal information in an effort to defraud.

Medical Identity Theft

Medical Identity TheftAnother alarming new trend is in the form of medical identity theft where criminals use your medical insurance to receive care and services without paying for them. A recent study by the Ponemon Institute estimates that nearly 1.5 million people in the United States have been victims of this crime and some with serious consequences. Medical identity theft can be difficult to detect and resolve, thus the victim can face large medical and insurance bills.

Beyond the financial challenges, medical identity theft frequently results in erroneous information being added to a person’s medical record or the creation of an entirely fictitious medical record in the victim’s name. When a person seeks care, incorrect medical information such as medical history, blood type, drug allergies and other false information can lead to life-threatening situations.

Protect Yourself

Simply being more cautious with whom you share your Social Security number can go a long way in avoiding fraudulent activity. Avoid carrying your Social Security card with you, and do not give it out unless it is essential. For instance, many medical facilities ask for it, but you are not legally obligated to provide it.

Watch your mailbox. Consider installing a locking mailbox and place your outgoing mail in a post office box. Mail theft is often a source of stolen personal information.

Monitor your accounts. Review transactions on your bank and credit card accounts to ensure they have not been compromised.

Monitor your credit report. Take advantage of the free access to your credit reports at Commercial services are available, such as Lifelock, which do this for you, but their value has received mixed reviews. Immediately respond if you discover your personal information has been compromised. If the stolen data includes your Social Security number, take extra measures.

Be smart. Use caution when using the Internet: don’t click on unfamiliar links, open emails from unknown senders or input personal information on unsafe websites. Scammers send “phishing” emails to induce you to enter personal information on fraudulent sites. Never provide personal data to an inbound caller or email. Simply request a phone number and verify that it is legitimate.

Don’t be too social. Be discriminating in the information you place on social media sites, like Facebook. You should avoid posting information such as your date of birth, a pet’s name or your mother’s maiden name, since those are often used in the challenge questions banks and other sites use to confirm your identity.

Shred. Use a confetti-type paper shredder for documents with personal information. If you do not have an adequate shredder, bring us your materials, and we will shred them for you.

Be careful with wireless networks. Make sure your wireless network is secure to protect it from hackers. If you are on a public Wi-Fi network, like one at a coffee shop or other public place, any information you transmit is potentially exposed.

Secure your online accounts. Set strong passwords with letters, numbers and symbols; don’t use the same one for all of your sites; and, add optional security questions that don’t have answers that can be found in public places, like your Facebook or LinkedIn profiles.

These steps can better protect your data from thieves, both online and offline. Most cost nothing, and many of them just make common sense. When we are complacent, we become an easy target for fraud.

Victim of Identity TheftIf You Become a Victim

Even if you have taken all these precautions, there is always the chance of your information being stolen, perhaps because of sloppiness or wrong-doing by a third party with access to it.

Here are some additional measures to further protect you once someone has your information:

  • Place a security freeze on your credit reports to prevent someone from opening credit in your name.
  • Consider signing up a free credit monitoring site, like Credit Karma, to be alerted to changes in your credit report.
  • Make copies of the front and back of all credit cards, so you can easily cancel them if they are lost or stolen. You may also want to have all automatic payments come from one card that you keep separate and hidden at home—so you don’t have to worry about updating them all if your wallet is lost or stolen.
  • File a police report. Even though it is unlikely that the perpetrators will be caught, you will likely need to provide the police report to creditors to document unauthorized use.

Our Security Policy

The matter of client data privacy and protection is of the utmost concern at Wealth Dimensions, and we are constantly seeking advice on to how to keep your data safe and secure. This matter is a top priority for our custodial partner, Fidelity Institutional, as well. The following are some of the things we do to protect you from identity theft:

  • We have a policy to encrypt electronic communications that contain sensitive information.
  • We have a separate locked shredding bin, and we have hired a professional service to shred this information. When they do, we escort them to their shredding truck and personally monitor the shredding of this data.
  • We have a policy of locking away client information at our personal work stations each night, so this data cannot be copied or removed when we are not present.
  • We have installed firewalls to protect from unauthorized access to our systems, and our cloud partners have done the same.
  • We use strong passwords as suggested by industry experts, and we have a regularly scheduled protocol for changing all passwords related to client data.

Managing and protecting your personal information is a component of prudent financial planning. As your financial advisor, we are vigilant about our part in protecting your information. We also want to assist you in taking the appropriate steps to protect yourself. As such, we intend to make this issue a regular part of our client reviews. If you are a victim of identity theft, please contact us immediately so that we can help you mitigate and resolve any damage.

Thank you for your continued confidence in our services.


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Information provided has been prepared from sources and data we believe to be accurate, but we make no representation as to its accuracy or completeness. Data and information is general in nature and not meant as specific to any particular situation. As such, you should not act on this information and should seek advice based on your particular circumstances. Wealth Dimensions Group, Ltd, shall not be liable for any errors or delays in the content or for the actions taken in reliance therein.

Please be advised that this material is not intended as legal or tax advice. Accordingly, any tax information provided in this material is not intended and cannot be used by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer.