Investment firms have a client service feature that may be a benefit to certain investors. They will ask you whether you would like to provide the name and information of a trusted contact.1
You do not have to supply this information, but it may offer some advantages. The request is made with your best interest in mind – and to lower the risk of someone attempting to make financial decisions on your behalf.1
Why is setting up a trusted contact so important? While no one wants to think ill of someone they know and love, the reality is that there is $3.4 billion worth of suspicious transactions a year related to elder financial exploitation, according to the Financial Crimes Enforcement Network.2
The trusted contact request is a response to this reality. The Financial Industry Regulatory Authority (FINRA) now requires that investment firms make reasonable efforts to acquire the name and contact info of a person you trust. This person is someone that investment firms can contact if they suspect the investor is making an “unusual financial decision” or appears to be suffering a notable cognitive decline.3
Investment firms may put a hold on disbursements of cash or securities from accounts if they suspect the withdrawals or transactions may involve financial exploitation. In such circumstances, they are asked to get in touch with the investor, the trusted contact, and other agencies, if necessary.3
Who should your trusted contact be? At first thought, the answer seems obvious: the person who you trust the most. Yes, that individual may be one of the best choices – but keep some factors in mind.
Ideally, your trusted contact is financially savvy, or at the very least, has some basic financial knowledge. You may trust your spouse, your sibling, or one of your children more than you trust anyone else, but how much does that person know about investing and financial matters?
You should have a high level of confidence that your trusted contact will behave ethically and respect your privacy. This person may be given confidential information about your investments.
It is encouraged that your family members know who your designated trusted contact is. That way, any family member who might be tempted to take advantage of you knows another family member is looking out with your best interest in mind, which may be an effective deterrent to elder financial abuse. It should be noted that the trusted contact may, optionally, be an attorney, a financial professional, or a CPA.3
Your trusted contact is your ally. If you are being exploited financially or could be at risk of such exploitation, that person will be alerted and called to action.
As the old saying goes, money never builds character, it only reveals it. The character of your trusted contact should not waver upon assuming this responsibility.
1. FINRA.org, 2023
2. FinCen.gov, 2023
3. FINRA.org, 2023
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.