According to a study at the University of California, Berkeley, web-based password manager services have significant flaws and are vulnerable to attack. A paper, titled “The Emperor's New Password Manager: Security Analysis of Web-based Password Managers” by Zhiwei Li, Warren He, Devdatta Akhawe, and Dawn Song, details the study of five popular password management services.
The report states, “… in four out of the five password managers we studied, an attacker can learn a user's credentials for arbitrary websites. We find vulnerabilities in diverse features like one-time passwords, bookmarklets, and shared passwords.”
Password managers have gained popularity as a means for avoiding the proliferation of many different passwords for many different websites. Authentication with the password manager service opens all the user's online accounts. Unfortunately, an intruder who gains access to the password manager thus gains access to the user's entire Internet presence.
Most of the services tested in the study responded quickly to the feedback, patching vulnerabilities discovered in the research; however, the authors of the study point out that their investigation was by no means comprehensive, and other vulnerabilities might also exist. Further study will lead to an automated solution that will lead to more complete vulnerability testing. In the meantime, if you decide to go without the services of a password manager, keep in mind that the age-old practices such tools were developed to prevent, such as using the same password for all your accounts or writing your password on a Post-it note stuck to your desk, probably will not offer a greater degree of protection.