Financial advisers are increasingly worried about securing client information and the consequences of a data breach, but iCapital has a new idea about how to make it safer for advisers to access its network of alternative assets.
The New York City-based fintech received three patents for new data security technology that iCapital claims will let asset and wealth management firms generate and share documents without providing any personally identifiable information (PII) to a third party. Advisers and fund managers can see client information on the iCapital platform without ever having to give iCapital access to the data.
At a high level, iCapital operates a small server containing confidential information that only exists within a firm’s private network. Each piece of client information is assigned a unique code, and only the firm has the keys to decrypt those codes. When iCapital connects with that server to pull information, all that's visible are anonymized tokens. But for an adviser with the firm, the information will be translated into easily readable English.
“We were able to develop solutions that allow [advisers] to see information in reports without having that data resonate at all in our system,” said Mike November, a managing director and head of architecture at iCapital.
Nearly ever other technology vendor that advisers use requires them to provide at least some level of access to client data. But every one of those creates the risk of a data breach, said Mark Lobel, principal of cyber, risk and regulatory at PwC.
“Certainly, one of the best ways to manage third-party data risk is to not share the data with third parties in the first place,” Lobel said in a statement.
The changing regulatory environment around data security has large firms looking for new ways to store client information, said iCapital chief information officer Tom Fortin. In January, Morgan Stanley paid $60 million to settle a class-action lawsuit involving a data breach, and regulators are making cybersecurity a priority in examinations.
After iCapital developed the technology with some large financial institutions, the patents will allow the fintech to bring it to advisers of any size on its network, Fortin said.
“When we speak to firms that deal with high-net-worth individuals, they need to demonstrate an extraordinary level of care with client information,” he said.
While the technology was originally developed with cybersecurity in mind, the patents have even broader applications for firms, November added. “Firms have a hesitancy to share their data with anyone.”
The technology will be proprietary to iCapital, but the company isn’t averse to someday making it available to other technology vendors, Fortin said. However, the company is going to focus on implementing with its own customers first before commercializing it outside of iCapital.
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