For over 20 years, I’ve assisted clients in navigating market fluctuations, tax changes and life transitions. Recently, I’ve encountered a new challenge: helping clients who don’t have a trusted contact listed. In rare situations, it may be necessary to reach out to someone who can check on your client if they’re unwell or experiencing difficulties.
Most financial plans consider two key points in time: (1) When your client is fully able to manage their finances; and (2) when someone else legally takes over. However, there’s often a vulnerable middle ground where your client’s confidence and understanding can begin to diminish well before any formal diagnosis occurs. This gap may not be addressed in your client’s financial plan, potentially putting their wealth at risk. Furthermore, this issue can be more pronounced for clients who have no children, close family or friends to support them.
It may feel like a difficult topic to bring up, but it’s a simple fix that can have a great impact later. Let’s discuss the importance of adding a trusted contact.
What’s a Trusted Contact?
The concept grew out of recent financial regulations designed to protect investors, particularly older adults, from fraud and financial exploitation.
A trusted contact is someone your client authorizes their financial firm to contact if the firm suspects unusual account activity, can’t reach your client or has concerns about the client’s well-being.
This isn’t a power of attorney, which means it doesn’t grant this individual the authority to move money, execute trades or make decisions on your client’s behalf. Instead, they serve merely as a point of contact for you, as your client’s advisor, to verify that everything is fine. Most importantly, it acts as a small safeguard that protects the middle ground and can make a significant difference.
Why Designate Trusted Contact?
A trust contact can help clients in several ways:
Combat elder financial abuse. Elder financial abuse affects millions annually. The FBI reports that over $28 billion is lost each year to financial exploitation, with $4.9 billion in losses from fraud complaints in 2024 alone. A trusted contact acts as an early warning system. If you notice red flags, such as sudden large withdrawals, unauthorized transfers or unusual trading patterns, you can alert your client’s trusted contact to intervene before irreversible damage occurs. This process respects your client’s privacy, as you share only the necessary information to confirm their concerns.
Provide support during incapacity or health challenges. Life events, such as illness, cognitive decline or an unexpected accident, can hinder your client’s ability to manage their finances. If your client doesn’t have a trusted contact, you may need to freeze your client’s accounts until legal documentation is provided, which can delay access to funds needed for medical care or other essential expenses.
By designating a trusted contact, your client can streamline communication. This individual can confirm your status or provide context, facilitating a quicker resolution. Additionally, having a trusted contact can be beneficial in everyday scenarios where regular communication may fail, such as during international travel, if your client’s phone is lost or if your client is temporarily relocated. Your client’s trusted contact can help bridge those gaps, ensuring that time-sensitive matters are addressed promptly.
Safeguard your client’s assets during vulnerable periods. Protecting your client’s assets from risks such as fraud is crucial, especially during times of reduced capacity. Having a trusted contact can serve as an essential safety net, particularly during volatile market conditions or major life changes. This simple yet powerful step can significantly help preserve the wealth your client has worked a lifetime to build.
Trusted Contact vs. Power of Attorney
Many clients assume these are the same, but they serve very different purposes.
Both play a role in protecting your client’s financial life, but the trusted contact serves as the first line of defense. A simple, proactive safeguard that costs nothing and requires no legal paperwork.
Choosing the Right Trusted Contact
Who should your client select as your trusted contact? It should be someone your client trusts to answer the phone, remain calm in a crisis and always look out for their best interests.
Your client doesn’t need to choose the same individual as their power of attorney or executor. In fact, separating these roles can create beneficial checks and balances. Some individuals opt for a spouse or an adult child, while others may select a sibling, close friend or even a professional advisor, such as an attorney or accountant. The most important factors are that this individual is reachable and dependable.
Designating a trusted contact is a straightforward task that can provide support and peace of mind for your client’s wealth management and financial plan.
