You’re probably used to getting (and ignoring) lots of information from your brokerage, mutual fund, or investment adviser. But here’s one notification you should pay attention to: a request to designate a trusted contact.
What’s a trusted contact? It’s a person 18 or older who can tell your financial institution where you are — and how you are — if you can’t be reached or there’s something suspect about your financial requests or instructions.
Suppose, for example, your financial institution notices unusually large withdrawals from your retirement account, or that someone in Brussels has charged the down payment on a BMW to your debit card. Normally, your bank or brokerage will simply call you and ask what on earth you’re doing (in so many words).
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But what if your financial rep can’t reach you because you’re out of town, or you’re sick, or you’re simply letting your mail pile up? In that case, your trusted contact can tell the bank where you might be, or if there could be some other reason you’ve been out of touch, such as travel or a natural disaster.
Or what if your actions are suddenly out of character? For financial advisers, there’s a clear reason why clients should have a trusted contact.
“Suppose you had a conservative client — he’s paid off his house, doesn’t use credit cards — and one day he calls and says, ‘I need $100,000 and I need it now,’” says Mary Ballin, partner and wealth adviser for Perigon Wealth Management in Walnut Creek, California. “It’s a sensitive situation,” she says. “You want to make sure he’s okay.”
Vanguard, the Valley Forge, Pennsylvania, mutual fund giant, has a team dedicated to calling attention to accounts whose owners may be having cognitive difficulties or are potentially being taken advantage of, says John Ginelli, head of investor protection at Vanguard.
The company uses a mix of surveillance methods, ranging from computer algorithms to referrals from telephone representatives, to flag unusual activity. Only members of the team may reach out to a trusted contact, he says.
Even though you’re not legally required to appoint a trusted contact, you probably should. Here’s what a trusted contact might do:
Contacts need to be able to verify the client’s home and cell phone numbers, and possibly the client’s e-mail address. If the client has changed his or her residence or phone number, a trusted contact should know that, too.
Know who can speak for the client
Contacts should be able to inform the financial institution of any legal guardian, executor, trustee or holder of a power of attorney on the client’s account. These individuals can also be helpful in tracking someone down.
Speak to whether there is a health or other crisis
Is the customer in the hospital perhaps, or showing signs of dementia? For example, if a customer inquires repeatedly about a transaction and seems confused, the company may call a trusted contact to see whether they have noticed any difference in behavior.
Trusted contacts should also be able to say whether they think someone is being manipulated or abused.
If you’re the trusted contact, you might have to consider proactively getting in touch with the financial institution and the client to discuss a concern.
For example, victims of fraud may refuse to believe that they’re being conned, says Ginelli. “A trusted contact might help that client to see the light.”
What trusted contacts can’t do is access a client’s accounts or make transactions. And if you’re asked to be a trusted contact, don’t worry about sharing your information with the financial institution — it may not use information about a trusted contact for marketing purposes, so agreeing to be one won’t result in sales pitches for investment products.
Typically, your trusted contact won’t be your financial planner or broker. Barry Glassman, a certified financial planner with Glassman Wealth Services, agrees.
“I’ve never been asked to be a trusted contact, nor would I accept that role. It seems like a conflict. It should be someone who interacts with the client beyond a financial planning relationship.”
Clearly, your trusted contact needs to be relatively easy to reach. For married couples, the obvious candidate is a spouse, Ballin says.
Older couples might also consider an adult child, or the executor of their will, Ginelli says. You may establish more than one trusted contact.
And don’t forget to ask your contact first.
“Before adding their information to your accounts, it’s a good idea to discuss this with your chosen trusted contact so they’re aware of the responsibility should your financial institution need to reach out,” says Leanna Devinney, vice president, branch leader at Fidelity Investments.
If you have already named a trusted contact, review that designation periodically. People drift apart — or die. In either case, they won’t make a good trusted contact.
The trusted contact form is optional, even though the Securities and Exchange Commission and the Financial Industry Regulatory Authority endorsed the policy in 2018. If you’ve never seen one, you’re not alone. “I haven’t received one yet,” says Patrick Chu, editor at the Wall Street Journal.
What percentage of investors have a trusted contact? “Like every firm out there, I can say that we don’t have enough,” Vanguard’s Ginelli says. “The more the better. The law requires us to solicit people to have trusted contacts and have a method for doing so, but it doesn’t require clients to have one.”
If you’re interested in naming a trusted contact, call someone at your broker, financial adviser, or mutual fund company. They should be able to provide you with the proper forms. You may also be able to find a trusted contact form on your financial representative’s website.
Ginelli says that some clients have reached out to Vanguard after getting a diagnosis of cognitive disability, for example. The trusted contact form is probably the easiest financial form you’ll ever fill out, he says. “We just need a name, a phone number, a street address, or an e-mail address.”
Other ways to protect your financial account
If you’re worried about becoming the victim of fraud or making unwise actions on your own because of cognitive disability, be sure to designate someone with power of attorney in case you’re disabled or otherwise unable to take care of your own affairs, even temporarily.
Setting up joint financial accounts with a spouse or an adult child can ensure that someone is watching your money — although a joint account will let the co-owner make withdrawals, too. Authorizing someone (often called an agent) can give them permission to make transactions in your account, but the authorization can also be drawn up to allow only account monitoring or inquiries.
Finally, make sure you’re doing what you can on your own to protect your accounts. Use strong passwords, multifactor identification and secure Wi-Fi.
Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.
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