Protect Clients with a “Trusted Contact”

With trusted contact information, financial advisors are playing a frontline role in preserving their clients’ assets at their most vulnerable time in a way no machine or big discounter ever can.

To view the full article please register below:

    First Name (required)

    Last Name (required)

    Your Email (required)

    Protect Clients with a “Trusted Contact”

    Protect Clients with a “Trusted Contact”

    New rules went into effect in February 2018 to help protect seniors against financial abuse. Rule 4512 now requires advisors to make reasonable efforts to obtain the name and contact information of a trusted contact for a customer’s account.

    Additionally, Rule 2165 permits FINRA member firms to place a temporary hold on the payment of funds or the disbursement of securities from the account of a “specified adult” client where there is a reasonable suspicion of financial exploitation, and to advise the trusted contact of the temporary hold. (A “specified adult” is any natural person age 65 or older, or a natural person age 18 and older that a member firm reasonably believes has a mental or physical impairment that renders the individual unable to protect his or her interests.)

    Here’s What You Need to Know

    A customer is not required to provide a trusted contact, though financial advisors should explain that the trusted contact is an important tool for protecting client assets and responding to possible financial abuse.

    Rule 2165 does not extend to executing securities transactions, or placing a blanket hold on the entire account, even where there is a belief of financial exploitation on a particular disbursement request.

    While obtaining the trusted contact information is now part of the new account opening process, advisors are expected to seek trusted contact information from existing clients during the course of ordinary or regulatory-required customer updates.

    Why Advisors Should Care

    A 2016 study by Allianz found that 37 percent of family or friend caregivers reported that the person they care for had been a victim of elder financial abuse, with an average financial loss of $36,000.1

    It’s understandable that an advisor might feel some trepidation or discomfort in asking their clients, “Whom do you trust?” Yet, it represents a perfect opening to a larger conversation about an issue most aging clients will eventually face, i.e., cognitive decline.

    Obtaining a trusted contact can be folded into a larger conversation about having a plan for managing finances in a client’s later years:

    • Is there a financial Power of Attorney?
    • Is there a trusted family member, friend or representative that can be relied on to help?
    • What are the early signs that a spouse should look for that may indicate a diminishing capacity to handle financial and investment decisions?

    And, if advisors are looking for another value advantage relative to robo-advisors and discount shops, here it is: with trusted contact information, you are playing a frontline role in preserving your client’s assets at his or her most vulnerable time in a way no machine or big discounter ever can. That may not reflect in the portfolio’s annual performance number, but it will provide a welcome level of comfort to your clients.

    If you have more questions on these new rules, start with FINRA’s FAQ.



    See referenced disclosure (2) at 







      Subscribe to receive a monthly recap of our three most popular posts.

      Recent Videos


      AP Awards 2021