Florida Elder Law & Estate Planning Blog


Who Do You Trust? Your Bank & Brokerage Want To Know

Who do you trust? Your brokerage, bank and other financial institutions want to know. When you open a new account or update an account established before Feb. 5, 2018, they will ask you to provide the name of a “trusted contact.”  Your trusted contact is the person the institution will reach out to if anything seems awry with your account and you cannot be reached.

The trusted contact rule was established by FINRA (The Financial Industry Regulatory Authority) in 2018 to help combat the burgeoning incidence of financial abuse. Prior to the rule, a financial institution’s hands were effectively tied if it observed any suspicious activity; privacy restrictions and liability issues prevented it from reaching out to family members. This gave bad actors plenty of time to fly under the radar and deplete accounts. With the 2018 FINRA rule, your financial institution is now empowered to reach out to your trusted contact with its concerns, without fear of legal blowback.

Although you are not required to provide the name of a trusted contact, it is a good idea to do so. It gives your financial institution an additional tool to protect you from fraud and theft, which disproportionately affect older people – so much so that The Elder Financial Protection Network calls financial fraud “The Crime of the 21st Century.” According to the Consumer Financial Protection Bureau, the number of  suspicious activity reports filed by financial institutions with the national Financial Crimes Enforcement Network quadrupled from 2013 to 2017, involving more than $6 billion in losses.

 

Trusted Contact Not The Same As Agent Under Durable Power of Attorney

Your trusted contact must be at least age 18 and should be someone you trust implicitly. Your trusted contact can be a family member, friend, an attorney or accountant or other professional – just about anyone in whom you have  confidence. Your trusted contact has no power over your account. He/she is not even entitled to get information about your account, and cannot transact business on your behalf.

Your trusted contact need not be the same individual as your agent under your durable power of attorney. In fact, it’s generally better if they are separate individuals. This provides a second, independent set of eyes on your account and thus, provides you with yet another level of security.

When And How Would Your Bank Reach Out To Your Trusted Contact?

Your bank or brokerage will attempt to reach your trusted contact if it observes suspicious activity on your account and cannot reach you, or if it has concerns about your competence to handle your account.  For example, let’s say you have a bank account for many years at Bank XYZ. Your Social Security checks have been deposited in it every month for years, and to date all your withdrawals have been relatively small. Then, one day, a large withdrawal is made that nearly depletes the account. Noticing the unusual activity, your bank would attempt to reach you. If unsuccessful, the bank would then follow up with your trusted contact, who would be asked how you could be reached, the status of your health, and possibly who serves as your agent under your durable power of attorney. Depending on the responses, the bank may place a hold on your account pending further investigation. Temporary holds on the accounts of account owners age 65 and up when financial exploitation is suspected are permitted under FINRA rule 4512.

Other Things To Know

  • You can name more than one trusted contact so that if contact A cannot be reached, the financial institution can reach out to contact B.
  • You can remove a trusted contact and/or replace the person with someone else at any time.
  • If you have an existing account and you have not been asked to provide a trusted contact, you may get in touch with your financial institution to initiate the process.

Read more about the trusted contact rule here.