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Who Do You Trust?

September 14, 2018 — During my 30+ years as a financial professional, I’ve seen a LOT of change. Sometimes it’s breaking news. Sometimes, it’s more subtle. A recent subtle change is unfortunate. Not because of the change itself, but because of the reasons for it.

Have you noticed that firms like mine have started asking you to name a Trusted Contact, such as an adult child or sibling? Your Trusted Contact doesn’t have access to your accounts the way someone with a power of attorney might. But by naming a Trusted Contact, you’ve given your financial provider somebody else they can talk to about your activities if something seems “off.”

There are two unfortunate, but increasingly valid reasons to designate a Trusted Contact.

First, there’s fraud. As you probably know, online imposters are increasingly effective at turning your money into theirs by pretending to be you. What if your advisor, banker or broker suspects it’s not really you requesting that urgent wire transfer or asking for an immediate address change? Especially if you’re not readily available, having a Trusted Contact to turn to can help them catch imposters. In fact, FINRA (your broker’s regulator), now requires its member firms to ask new clients to designate Trusted Contacts.

Second, we’re all living longer. Even the best of us may outlive our mental capacity. What if I suspect a client is being taken advantage of, or is otherwise “going loopy” (as one of my clients put it)? Let’s say she calls and asks me to help her withdraw $10,000 to give to a nice young man she met at church that morning; he needs to buy a new front door. I can’t legally refuse her request. It’s her money, after all. But if she’s authorized me to first call her son, who is a Trusted Contact, I can alert him of the situation, and hopefully prevent a fraud. At my firm, we’ve also created a Diminished Capacity form for clients to sign, to help us further prevent these sorts of mishaps.

For better or worse (and subtly, over time), Trusted Contact and Diminished Capacity forms have become a part of our world. I wish they weren’t necessary, but they are.

Written by John A. Frisch, CPA/PFS, CFP, AIF, PPC

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