What is encryption in transit and at rest?

Definition

Encryption turns data into unreadable code that only someone with the right key can decode. "In transit" means while data moves between your device and the vendor, or between systems. "At rest" means while it's stored on a server or in a database.

Most reputable software vendors encrypt both by default, but the details (who holds the keys, which data is covered) vary.

Why it matters for advisors

Encryption is a basic safeguard for client information and a standard question in vendor reviews. It reduces the damage if a laptop is lost or a storage system is exposed.

It isn't the whole answer. Encrypted data is still readable by the vendor's systems and staff with access, so access controls and logging matter too.

Encryption protects data from outsiders. It doesn't stop the vendor or its AI features from reading data they're allowed to process. Ask about encryption, and separately ask who at the vendor can access your data and why.

Example

In a security questionnaire, a notetaker vendor confirms encryption in transit and at rest, and the firm follows up on who at the vendor can access transcripts and how that access is logged.

Watch out for

"Bank-level encryption" is marketing language. Ask what's encrypted, how, and who holds the keys.