Legal & Financial Planning

Why You Need a Trusted Contact to Protect Your Finances

Cameron Huddleston
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Cameron Huddleston
  •  
August 3, 2022
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Why You Need a Trusted Contact to Protect Your Finances

Think back to the last time you went to a doctor’s office or medical facility. You likely were asked to name an emergency contact, and you probably didn’t hesitate to write down the name of your significant other, a family member or a friend. 

It makes sense to have someone medical personnel can get in touch with if something happens to you. After all, this can ensure your well-being. 

But what about your financial well-being? If your financial institutions and advisors asked you to name a trusted contact, would you be willing to provide the name of someone they could reach out to if they were concerned about activity in your account and couldn’t reach you? 

The answer should be “yes.” To protect your money, you need to name trusted contacts for your financial accounts.

What is a trusted contact?

Since 2018, brokerage firms have been required by FINRA—the Financial Industry Regulatory Authority—to ask their retail customers to provide the name and contact information of a trusted contact person. Although they’re not required to, other financial institutions such as banks and credit unions and financial advisory firms also ask clients to name someone they trust as a contact on their accounts.

The aim of this practice is to help protect older adults, in particular, from financial exploitation. However, all adults can benefit from naming trusted contacts on their accounts. 

A trusted contact is someone your financial firm can contact in certain situations, which can include the following:

  • If the firm is concerned about activity in your account and can’t reach you
  • If the firm is concerned that you’re experiencing a health issue and needs to confirm your health status
  • If the firm needs to confirm the identity of a trustee, power of attorney or court-appointed conservator on the account
  • If the firm is concerned that you’re a victim of financial exploitation and needs to contact someone you trust to protect you

According to FINRA, adding a trusted contact to your account puts your financial firm in a better position to keep your account safe.

 [ Find Out: How Your Risk of Financial Exploitation Increases With Age ]

What a trusted contact can and cannot do

Think of your trusted contact as your emergency contact for financial matters. That person is there to help, not act on your behalf.  

Again, a trusted contact is someone you’ve authorized a financial firm to contact in limited circumstances. The firm can disclose only certain categories of information that can be used in administering and protecting your account, according to FINRA. For example, your trusted contact can confirm your contact information, discuss your physical and mental health status, or address suspicions your firm might have that you’re being exploited.

Unless your trusted contact also has been named power of attorney or legal administrator of your account, he or she can’t make transactions within your account or decisions about your account. 

(Keep in mind that you should name a power of attorney to make financial decisions and transactions for you if you’re unable to yourself. This allows you to choose someone you trust to manage your finances in emergency situations.)

How a trusted contact can help keep your money safe

One of the most obvious situations in which a trusted contact can help protect your account is if you’re experiencing cognitive decline and someone is taking advantage of that situation. If, for example, you make a large withdrawal from your account, the financial firm can ask your contact whether you might be the victim of a scam and can encourage your contact to step in to protect you. 

However, there are plenty of other situations when a trusted contact can help protect your account. Your financial institution might notice suspicious activity on your account but be unable to reach you because you’re out of the country, have a health emergency or have been displaced by a natural disaster. Your trusted contact might even be needed to provide the name of the executor of your estate when you die. 

Choosing a trusted contact

The person you name as a trusted contact must be at least 18 years old. The person also should be someone who is close to you and whom you can trust to look out for your best interests, such as a family member or friend. 

Your trusted contact can be the person you’ve named as your power of attorney but doesn’t have to be. In fact, it’s recommended that you name someone other than your power of attorney as a trusted contact as an added layer of protection. For example, if your financial firm suspects that your power of attorney is abusing his or her power, it can reach out to your trusted contact to share its suspicion. 

It also can be a good idea to name more than one trusted contact to have a backup in case your financial firm can’t reach your primary contact. 

How to add a trusted contact to your accounts

If your financial firm is required to ask for trusted contacts, it likely has reached out to you to provide contact information for someone you trust. If you haven’t complied with the request, check your account online to see if you can add a contact or reach out directly to the financial firm. 

If your financial institution hasn’t asked for a trusted contact, ask if you can provide one. Then discuss the circumstances when the financial institution would be allowed to reach out to your contact and what information could be shared with the contact. 

Another way to add trusted contacts to your financial accounts is to use a service such as Carefull. Carefull provides financial account, credit and identity monitoring and alerts you when it spots unusual activity, signs of fraud and money mistakes. It also allows you to give view-only access to account balances and transaction history to any responsible adult child, family member, advisor or close friend you choose so they can see what sort of account activity is normal for you and help out if Carefull alerts you and them to unusual account activity. 

Carefull also helps you share crucial documents and passwords through a digital vault, so a trusted contact is able to retrieve them in case of an emergency. It ensures that those you trust have the information and access they need to help protect your finances.

Be aware that you can remove or change trusted contacts at any time if you change your mind. Making sure that you have one, though, can go a long way toward keeping your money safe.

[ Keep Reading: 5 Questions People Over 55 Should Ask Their Bank ]

Cameron Huddleston

Cameron Huddleston

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