Why You Need a Trusted Contact
A Trusted Contact can be contacted by your advisor in an urgent situation. A Trusted Contact gives your advisor someone to contact if they are concerned about your well-being. However, they can only be approached in limited circumstances. Examples of when an advisor may reach out to a Trusted Contact are: A client cannot be reached for an extended period, they make out-of-the-ordinary requests, suspected financial exploitation or fraud, a health emergency, or noticeable cognitive impairment.
How a Trust Contact Protects the Client and Advisor
A Trusted Contact protects both the client and the financial advisor. They exist to safeguard economic and personal well-being.
A Trusted Contact can protect a client in the following ways:
Identifying financial exploitation
Assisting in the event of an emergency
Address cognitive impairment
A Trusted Contact can protect the advisor in the following ways:
Reduce the risk of fraud allegations
Enhances ethical compliance
Can provide additional context in grey areas
Ensure the client is healthy and safe
Confirm the client’s whereabouts
A Trusted Contact is a lifeline for a client and advisor and can be critical.
What If I Don’t Have a Trusted Contact?
A Trusted Contact protects both you and your advisor. For example:
Mrs. Robinson, an 83-year-old retiree, has been a long-time client of a financial advisory firm. Over time, she has accumulated a substantial amount of savings and is reliant on these funds as a source of income in retirement.
Mrs. Robinson received a phone call from an individual claiming to be her grandchild. They told her they were in urgent need of $50,000 for a legal emergency. The caller insisted that she tell no one and wire the money as soon as possible. Wanting to help, she prepared to send the money to her grandchild.
When she called her advisor and explained the situation, the advisor found this to be a very unusual request from their client. The advisor reached out to Michelle, Mrs. Robinson’s daughter and her Trusted Contact.
The advisor immediately called Michelle to verify the situation. Michelle knew immediately that this was a common scam and Mrs. Robinson’s granddaughter was safe and had no legal issues. With the help of the advisor, they stopped the wire in time, preventing Mrs. Robinson from a substantial financial loss.
Having a Trusted Contact meant that Mrs. Robinson avoided becoming a victim of fraud. It meant that the advisor could verify the unusual request and take the necessary actions to save their client from financial fraud.
Misconceptions About Trusted Contacts
There are a few reasons people are hesitant to choose a Trusted Contact. First and foremost, advisors often fail to explain what they are and why they’re essential to your well-being. By choosing not to appoint a Trusted Contact, you are putting yourself and your advisor at risk without reason. Here are some common misconceptions and why they’re just that – misconceptions.
Misconception: Trusted Contacts are only for seniors or people with cognitive or physical impairment.
Reality: Trusted Contacts are for everyone, regardless of age or cognitive ability, an accident or unforeseen event can happen to anyone.
Misconception: Trusted Contacts have the authority to access your accounts.
Reality: A Trusted Contact has no authority over your accounts. They cannot be given any financial information from the advisor under any circumstances. Information is only obtained from a Trusted Contact, not given to them.
Misconception: Having a Power of Attorney is a safeguard and follows the same rules as a Trusted Contact and even more privileges.
Reality: A Power of Attorney and a Trusted Contact are different. A Power of Attorney cannot appoint a Trusted Contact; only the account holder can. A Power of Attorney and a Trusted Contact should be different from one another. If your Power of Attorney is taking advantage of you, the Trusted Contact could be a lifeline in this situation.
Misconception: I don’t have someone I can use as a Trusted Contact.
Reality: Everyone has someone they can use as a Trusted Contact. It can be anyone who knows your whereabouts. They can be a friend, family member, or even a neighbor.
Appoint a Trusted Contact
While a Trusted Contact is not mandatory, they are crucial for clients and advisors. They are a critical part of your financial plan. They safeguard your well-being and ensure you and your advisor can handle your investments effectively and ethically.