What is a “Trusted Person” any why do we keep asking you if you’d like to add one to your account?

Since about the 1960s there have been a variety of rules and regulations in place to protect the privacy and personal information for investment clients. For obvious reasons, financial advisors and institutions cannot share client information without the client’s explicit consent. And for the most part, this is a very good thing.

However, as the rise in the financial exploitation of elder investors began to rise a few decades ago, these strict privacy and non-disclosure rules sometimes made it difficult for financial advisors to come the aid of clients whom they thought might be victims of financial abuse. Even if an advisor was concerned about a client, they may not be able to express their concerns with the client’s loved ones.

So due to these concerns about the financial exploitation of the elderly, the Securities and Exchange Commission or SEC created the trusted person rules in 2018. These new regulations require investment firms like ours to ask our clients to add a trusted person to their investment accounts.

A “trusted person” or “trusted contact person” is someone you authorize our firm to contact in very limited circumstances. For example, in the event that we become concerned about your mental or physical well-being or if we suspect fraudulent activity in your account and are unable to get in touch with you.

Who do you choose?

A trusted person is most often a trusted family member, but may also be an attorney, accountant, or another third-party whom you believe would respect your privacy and know how to handle the responsibility.

Some things to know as you pick a trusted person:

1. Although we are required to ask you, you are not required to name a trusted person, so you may politely decline our request.
2. We do not allow you to name a spouse as your trusted person because (a.) your spouse typically already has a relationship with our firm and your permission to speak with us, (b.) is likely aging alongside you, and (c.) hopefully is already keeping a watchful eye on you. You can think of your spouse as your first line of defense where as your trusted person is your second line of defense.
3. You may name more than one trusted person.
4. Your trusted person should be at least 18 years of age.
5. You can change your trusted person or persons at any time.
6. We have strict rules and procedures in place for contacting your trusted person. Our proper compliance officer(s) must give prior approval before your advisor attempts to contact your trusted person. And even then, we are very limited in what information we may disclose to that trusted person.
7. Your trusted person cannot request any information about your accounts, cannot make trades in your accounts, nor can they make any decisions about your accounts.
8. Naming a trusted person does not replace the important need to do proper estate planning and have the proper estate planning documents in place. Adding a trusted person does not make that person your power of attorney, your trustee, your legal guardian, or executor.

Our recommendation is that everyone name a trusted person to their accounts in order to provide an extra layer of protection. If you do not wish to do so at this time, a good time to reconsider adding a trusted person is when you have adult children and/or as you prepare to enter retirement.

If you have any questions about naming a trusted person, please feel free to reach out to our office at any time. We’d be happy to discuss your options.