The collapse of one of the world’s largest cryptocurrency exchanges (FTX) and the Optus and Medibank data hacks have shone a light on cybersecurity and the need to protect your assets.
Investors have enough to worry about – such as market volatility, inflation and interest rates – without also having to worry about the physical security of their assets.
To make investing one step less stressful, there are three things you can do to ensure your shares are kept safe and secure.
Buy and sell your shares in your own name
Look for brokers offering you CHESS/HIN ownership. It sounds complicated but what it means is you are the owner of your shares.
Read: Super left in accumulation phase costing thousands in tax
In Australia, most shares are bought and sold (including legal ownership, the exchange of money and titles) on the ASX (Australian Stock Exchange) via their system known as CHESS (Clearing House Electronic Subregister System).
Investors have the option of buying and selling shares through the CHESS sponsorship/HIN model or the custodian model.
CHESS users are allocated a unique Holder Identification Number (HIN), which is like a bank account number. Your HIN can be just for you or you can fit under a commingled or custodial model where your investments are held in the same account with others.
If something did happen to your broker, then you can simply move your shares to another broker or withdraw from your portfolio.
Read: Best and worst performing super funds revealed
There are several advantages to owning your shares with your own HIN, including tax and dividend advantages. Most importantly, the shares are owned by you and are always held in your name. You retain full legal and beneficial ownership of the shares.
In contrast, with the custodian model, your investments are pooled with others and managed by a third party.
You rely on their ability to accurately account for your investments. There is a risk that the shares may be sold or transferred without your knowledge, or worse, you may lose ownership of the shares entirely.
Know your broker
Before you start buying and selling, you should know a couple of things about your broker.
The broker you’re using should be based in Australia. It’s much harder to recover funds from companies based overseas, and much easier for them to shut up shop and disappear if they are not based in Australia.
Also, check to see if your financial services provider has a licence to operate.
Financial service providers in Australia must have a licence to be able to offer financial services to their clients. This is known as having an AFSL (Australian Financial Services Licence).
Licences are regulated by ASIC (Australian Securities and Investments Commission). You can check to see if your broker or financial services provider is licensed here.
Read: Could ‘buying the dip’ boost your retirement income?
Registered businesses have regulatory and legal obligations to which they must adhere to obtain and keep their licence. There can be heavy fines (and possible jail terms) for those who break the law and operate outside of their AFSL.
Activate extra security features
Most financial services providers these days offer something known as two-factor authentication. That means you have to go through at least two steps to access your account or make a withdrawal.
This could mean you have an account login and password. Once that is accessed, you will then be prompted to enter another password that is sent to you via SMS or email.
It was designed to ensure that you are the only person who can access your account. The great thing about two-factor authentication is that even though someone might know your password, they’ll still need to access your SMS or email to tamper with your account.
Two-factor authentication gives peace of mind as it provides an extra layer of bank level security and encryption to your account.
Chris Brycki is the founder and CEO of Stockspot. He was an inaugural member of two advisory committees for industry regulator ASIC, and was previously a fund manager at UBS.
Are you more cautious about the security of your assets since the high-profile hacking incidents? Why not share your strategies in the comments section below?
