The Evolution of Data Security

April 30, 2021

According to Eric Schmidt, we create as much information in two days now as we did from the dawn of man through 2003. The digital revolution has been powered by cheaper and faster infrastructure, allowing for the creation and storage of more data. More isn’t always better, but this treasure trove of information has become a vital tool to make more frequent informed decisions.

Over the past 51 years, The Fiduciary Group has observed a wide variety of investment conditions while experiencing major advances in technology and data. Technology has allowed the firm to better serve clients, make more informed decisions, and become more efficient. We’ve seen our data transform from physical form to the digital format we are familiar with today. Physical cash is rarely used, and stock certificates have been replaced with online custodial accounts.

This evolution over the past several decades has required — and will continue to require — adaptation to secure the latest forms of data. The same goes for our clients in protecting their sensitive data, as they play an important role as well. The French writer Jean-Baptiste Alphonse Karr once said: “the more things change, the more they continue to be the same.” Principles that have always been in place before the digital revolution still hold true in securing data, just with a digital application.

Era of Physical Data

In the pre-digital era, and indeed throughout most of history, important documents and valuables were physically stored and secured. Through the years, cash, gold, stock certificates, and sensitive data like Social Security numbers were all physically secured in locations such as a filing cabinet, bank vault, or safe deposit box. Steps were taken to physically secure those items. The bank doors and vaults were locked and security guards scanned for disturbances.

Having financial assets in physical form required manual entry, which increased the chance of human error. Dividends and interest payments had to be sent via mail and were sometimes even lost in transit. Checkbooks had to be balanced manually. Everything was labor-intensive and certainly not scalable. Today’s instant gratification expectation was unrealistic, but security was always top of mind in the financial services industry, just like it is today.

Era of Digital Transition

In the 20th century, technology evolved quickly, which helped store and process larger volumes of data. Adoption started slowly during its infancy with only select institutions having access to punch cards and magnetic drum technology. However, as technology progressed, costs came down and accessibility to better technology increased. In the 1980s, data was able to be stored on even smaller storage devices such as floppy disks, followed by compact discs in the 1990s. Because both items had to be physically inserted into a computer to be used, they had to always be located near the end user. This meant they had to be physically stored like any other physical file. Protecting this data was still, in many ways, a laborious task.

Computer networks grew in popularity as companies could better share and access information. Data was easier to access, and simple tasks could be automated, but data was still primarily stored on premises. This meant companies had to allocate resources toward storing, maintaining, and securing their data. Just like when information was mainly paper-based and physically stored, thought was still required as to how to protect their locally stored data. This included securing the entire building, specific secure rooms, and limiting internal access. On top of these considerations, the new environment required stronger moats around the organization’s data and limited access through the emerging digital channels.

Era of Cloud Storage

Since the earlier days of the digital era, the decline of physical data storage by the end user has been profound. This trend can be attributed to the rise of the cloud, storing data within a centralized off-site data center. Data stored on the cloud can easily be accessed anywhere, requiring credentials for access. The rise of the cloud has allowed end users to transfer responsibility for data storage and maintenance to professional data center organizations. In many ways, data is more secure with this new arrangement.

Security includes a mix of the old and the new. Data centers are now responsible for physical storage and data access, typically deploying a high level of security and limited access protocols. Data centers and software developers also take steps in the name of cyber security. Besides the obvious steps such as requiring credentials, data is typically encrypted to add additional layers of protection. The device being used by the end user also needs to be secure.

This has become second nature as we get used to these new tools and capabilities, but a focus on data security shouldn’t be diminished. Threats and scams are a constant threat and have been around since the beginning of human history.

Modern Era Considerations

Users leveraging cloud data storage capabilities no longer have to worry about misplacing their information as this responsibility has been transferred to software and data center providers. The potential of misplacing or losing that USB with childhood photos no longer exists if those images are stored on the cloud. However, this doesn’t mean end users have completely eliminated the responsibility of securing their data.

Although it seems cliche, users need to have increasingly strong password requirements on their accounts. A bank vault securing valuables shouldn’t contain a combination of 1-2-3. The same goes for important online accounts.

It’s advisable to use unique passwords and login credentials for different accounts. Like the watertight compartments on a ship designed to isolate a breach, unique passwords give you a head start on limiting exposure on the off-chance your information is compromised.

Cyber criminals and scam artists attempt to gain access to these credentials. Avoid handing over the proverbial keys to a thief. The most common method used by these criminals is phishing attempts. By now, most investors can recognize a fraudulent email requesting the user’s password, Social Security number, or malicious attachment. With that said, vigilance is required to avoid falling victim to these attempts.

An extra layer of protection against unauthorized access that is growing in popularity is multi-factor authentication. Taking the bank vault metaphor one step further, multi-factor authentication is akin to the metal door being shut, locked by key, and requiring a secret combination. In order to access your data or account, you must enter information you know and something you have. This is typically a username and password, along with a unique code that is sent to the user via text, email or app. This strategy adds one more verification step before allowing access to the account, reducing the chances of an unauthorized individual gaining access.


Technological advances have allowed our society to progress and our economy to become more efficient over the years. However, it remains vital to secure our sensitive information and valuables using the latest technology. Just as we lock our doors at night to keep out intruders and secure any cash we have on our person, the same instincts should be applied to securing our digitally stored assets.