Investment firms, like TD Ameritrade Institutional and Charles Schwab, have a new client service requirement. They must now ask you if you would like to provide the name and information of a trusted contact.1
You do not have to supply this information, but it is encouraged. The request is made with your best interest in mind, and is designed to lower the risk of someone taking advantage of you.
Why is setting up a trusted contact so important? Unfortunately, the people we care about occasionally try to take advantage of our love. According to The US Consumer Financial Protection Bureau, seniors who have been scammed lost an average of $50,200 to someone they know. And studies have shown that almost half of all seniors aged 65 and older manage their own finances. Statistically speaking, if you fall within this age range, you may be more vulnerable to scams.1
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 financial exploitation is suspected or they suspect the investor is suffering a notable cognitive decline.2
Investment firms may now put a hold on disbursements of cash or securities from accounts if they suspect the withdrawals or transactions amount to financial exploitation. In such circumstances, they are asked to get in touch with the investor, the trusted contact, and adult protective services or law enforcement agencies, if necessary.2
Who should your trusted contact be? At first thought, the answer seems obvious: the person who you trust the most. Yes, that individual is probably the best choice – but keep some factors in mind.
Ideally, your trusted contact is financially savvy, or at the very least, financially literate. 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?
Your trusted contact should behave ethically and respect your privacy. This person may be given confidential information about your investments. Is there any chance that they, upon receiving such information, might behave in an unprincipled way?
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. If no family members are up to the task, the trusted contact may be an attorney, a financial professional, or a CPA.1
Your trusted contact is your ally. If you are being exploited financially or could be at risk of such exploitation, your trusted contact may be alerted and called to action.
In Wisdom Wealth Strategies’ home state of Colorado, the issue of financial exploitation of seniors is a serious matter. The Colorado Department of Regulatory Agencies (DORA) created the program Senior$afe to help educate seniors and their loved ones in hopes of preventing financial abuse. You can learn more at their website.
As the old saying goes, money never builds character, it only reveals it. The character and morality of your trusted contact should not waver upon assuming this responsibility. Now is the perfect time to name your trusted contact. Choose your contact wisely. Need help? Please be in touch.
Andrea L. Blackwelder, CFP®, ChFC, CDFA® and Joseph D. Clemens, CFP®, EA are the founders and partners of Wisdom Wealth Strategies. Their shared passion is simple: to bring financial empowerment, understanding, and peace-of mind to people who wish to improve their financial future, build wealth for their families, and achieve financial independence. Click here to find out more about how you can work with the Denver Financial Advisors at Wisdom Wealth Strategies.
1 - CNBC, September 27, 2019
2 - FINRA, March 4, 2020
"Wisdom Wealth Strategies, LLC is a registered investment advisor offering advisory services in the states of Colorado and California, and in other jurisdictions where exempted." This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates.