Recent Cybersecurity Incidents Impacting Financial Services

Cyber threats are becoming more advanced and persistent, and financial advisors are increasingly in the crosshairs. The financial sector is an attractive target for cybercriminals because it holds highly sensitive client data and facilitates transactions worth billions. Recent incidents underscore how even large, well-funded organizations are vulnerable to cyberattacks, reinforcing the urgent need for better security measures. Below, we examine two significant breaches that have sent shockwaves through the industry.

FCA’s Warning After the CrowdStrike Incident

In late 2024, the UK’s Financial Conduct Authority (FCA) issued a stark warning to financial firms, urging them to strengthen their cyber resilience following the CrowdStrike incident. This cybersecurity event caused widespread disruptions across multiple industries, including financial services, raising concerns about firms’ ability to withstand and recover from large-scale attacks.

The attack exploited a vulnerability in endpoint security software—a tool meant to protect businesses from cyber threats. Ironically, the very systems designed to safeguard organizations became an entry point for hackers. Many firms relying on the affected security tools experienced outages and data compromises. In response, the FCA called for financial service providers to improve their defensive measures, implement rigorous incident response strategies, and ensure they can continue operating even if a key system goes down.

For financial advisors, this incident is a wake-up call: relying on a single security provider without contingency plans can be dangerous. Advisors should assess their cybersecurity partners carefully and have multiple layers of protection in place.

The Finastra Breach: A Stark Reminder of Third-Party Risks

Another alarming incident in the financial sector was the cyberattack on Finastra, a major fintech firm that provides banking software to institutions worldwide. Also in late 2024, hackers infiltrated Finastra’s systems and exfiltrated an estimated 400 gigabytes of sensitive financial data. This included confidential banking information, internal reports, and customer records, affecting several global banks and financial service providers.

The breach was traced back to a compromised employee account, which allowed attackers to bypass security controls and move laterally through Finastra’s internal network. Despite having cybersecurity measures in place, the company failed to detect and contain the breach quickly, leading to a massive data leak.

This incident highlights the dangers of third-party risks. Many financial advisors rely on third-party platforms for client management, trading, and data storage. While outsourcing services can improve efficiency, it also introduces vulnerabilities that cybercriminals can exploit. The Finastra attack serves as a crucial reminder to conduct regular security audits on external vendors and ensure they adhere to the highest cybersecurity standards.

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Key Takeaways for Financial Advisors

• Evaluate Third-Party Risks: Ensure that vendors and service providers follow strict cybersecurity protocols. Don’t assume their security is airtight just because they’re a well-known name.
• Have a Backup Plan: Relying too much on a single cybersecurity solution—like in the CrowdStrike incident—can be risky. Having a layered security approach helps reduce exposure.
• Improve Incident Response Readiness: Cyberattacks are inevitable, but firms that respond quickly can mitigate damage. Financial advisors should ensure they have incident response plans in place, including clear steps for containing breaches and notifying affected clients.
• Regularly Update Security Measures: Cyber threats evolve rapidly. Keeping software, security policies, and employee training up to date is essential for minimizing vulnerabilities.

By learning from these recent cybersecurity breaches, financial advisors can better prepare themselves for the evolving digital threats that could compromise their clients’ trust and financial security.

Why Hackers Target Smaller Financial Firms

Cyberattacks on large corporations often make headlines, but smaller financial firms are actually at greater risk. Hackers see them as easier targets because they often lack the robust security measures that larger organizations can afford. While massive breaches like those at Finastra and CrowdStrike draw attention, smaller firms are routinely attacked under the radar, with many incidents going unreported.

Why Are Smaller Financial Firms More Vulnerable?

Cybercriminals operate on the principle of opportunity—they attack where they expect the least resistance. Small and mid-sized financial advisory firms, while still holding sensitive client data, often don’t have the same cybersecurity budgets, dedicated IT teams, or advanced security protocols as banks and larger financial institutions.

Here’s why they’re prime targets:

• Weaker Security Infrastructure – Unlike larger corporations that invest in next-generation firewalls, AI-driven threat detection, and 24/7 security monitoring, many smaller firms rely on basic antivirus software and outdated systems. Hackers exploit these gaps to gain access.
• Limited Cybersecurity Awareness – Many smaller financial firms don’t have dedicated security personnel, making them more likely to fall for phishing scams, credential theft, or social engineering attacks.
• Third-Party Risks – Many advisory firms outsource IT management or use cloud-based platforms to store sensitive client information. If these vendors lack strong security controls, hackers can breach them and gain access to multiple firms at once.
• Perceived Lack of Monitoring – Cybercriminals assume that small firms don’t have the resources for constant security monitoring or rapid incident response, making them attractive for attacks that can go undetected for long periods.

Real-World Example: The Rise of Ransomware Attacks on SMEsOne of the most common types of cyberattacks against smaller financial firms is ransomware—malicious software that locks businesses out of their systems until a ransom is paid.A London-based wealth management firm recently fell victim to such an attack when a phishing email tricked an employee into clicking a malicious link. Within hours, hackers had encrypted all client records, shutting down the firm’s operations. The attackers demanded a ransom in Bitcoin, threatening to leak sensitive client data if payment wasn’t made. Without sufficient cybersecurity defenses or a solid data backup strategy, the firm faced a painful decision: pay the ransom or risk permanently losing critical financial data.While larger firms often have the resources to restore data from backups and recover operations, smaller firms may not have these safeguards in place. This makes them more likely to pay the ransom, fueling further attacks.How Small Financial Firms Can Defend ThemselvesDespite their smaller size, financial advisory firms can and must take proactive steps to improve cybersecurity:

• Invest in Stronger Security Tools – Basic antivirus isn’t enough. Consider next-gen endpoint protection, email filtering, and intrusion detection systems to prevent attacks before they cause damage.
• Enable Multi-Factor Authentication (MFA) – Weak or stolen passwords are a major entry point for hackers. Requiring a second layer of authentication significantly reduces the risk of unauthorized access.
• Regular Cybersecurity Training – Employees should be trained to recognize phishing attempts, social engineering tactics, and ransomware risks. A well-trained staff can serve as the first line of defense.
• Backup Data Frequently – Maintain offline backups of critical financial data so that ransomware attacks don’t cripple operations.
• Monitor Systems for Unusual Activity – Cybercriminals often lurk in networks for weeks before launching an attack. A Managed Security Service Provider (MSSP) can provide continuous monitoring and early threat detection.

Final Thought: Don’t Assume "We’re Too Small to Be a Target"Many financial advisors believe hackers only go after big corporations, but the reality is the opposite—smaller firms are targeted precisely because they are perceived as weaker. Proactively improving cybersecurity is about protecting client trust, preventing financial loss, and ensuring long-term business stability. And that's worth investing in!