Trust issues: Do you have a trusted contact person?

“Hey Arnold, can I get you to cash out another $15,000 for me?” “Of course,” I replied. “But Jane, forgive me, I just have to ask. This is the third time in three months that you asked to withdraw a large sum. Now, obviously, it’s your money and you can do with it as you like, but at this rate you are burning through it fairly quickly. Can I ask what’s going on? I know you didn’t really want to share that with me last time, but I can’t help but wonder if there is another way I can help. If you only need money for a short-term, temporary need, a loan might make more sense.” Jane was quiet on the other end of the phone for what seemed like an eternity. I thought maybe I had stepped over the line and started re-considering my comments. Was I a trusted contact person, it is all about trust.

“It’s my personal trainer,” she finally chimed in. “He’s such a nice guy, but he’s gotten himself in trouble and without this money he’s going to lose his apartment.” I could hear she was almost in tears.

Jane had been recently divorced and, from what I had heard about this “personal trainer” in the past, it was my opinion that she was being taken advantage of. After some discussion, she decided to lower the amount, but still intended to give him a chunk of money. I couldn’t stop her. I debated being more forceful but chose not to at that point.

One month later, Jane called us asking for another large withdrawal. After a similar discussion, I was more firm with her. “Jane,” I said. “Once again, it’s your money and you can do what you want with it, but you are being taken advantage of, and I can’t be part of that. If you choose to continue with this, you will have to find another advisor.” Fortunately, Jane and I had worked together long enough and had a strong enough relationship that my words were sufficient for her to pause and reflect. Thankfully, it worked, and she stopped allowing him to take advantage of her.

But that approach doesn’t always work.

Financial abuse is not that common, but it’s on the rise. Seniors in particular are at risk of being taken advantage of. Scammers have clued into the fact that CRA, grandchildren, and honeypot schemes work on this small, yet vulnerable, portion of the population. And that doesn’t even consider the myriad online schemes we’re seeing now. Unfortunately, as we age, we become more prone to falling for these schemes.

Financial institutes have struggled with how to deal with this. Most financial institutes don’t have the same sort of relationship with clients as we do, but regardless of whether that bond is strong or weak, we all want to prevent our clients from exploitation. As I said to Jane, it’s the client’s money; they can do as they please with it (which is exactly how it should be), so what can an advisor do if they suspect foul play? Frankly, up until recently there was very little we could do.

You may have recently heard the term Trusted Contact Person (TCP). If not, you can expect to hear more in the near future. This is a concept introduced to many financial accounts in the past year for precisely the type of situation referred to earlier. The Canadian Securities Administrators have now mandated that all investment advisors request a TCP for each client. If you haven’t already been asked to list one, be sure to ask your advisor about having one on file. 

In general, the idea is to provide a small amount of latitude for your advisor to break confidentiality in a limited number of situations. The TCP has no rights. They have no authority to act or advise. They are useful only in the event that the advisor is so concerned about the client that they feel the need to reach out. They are there for your protection only. In the past, when an advisor was concerned that someone was being taken advantage of or they suspected their client had lost the mental capacity to make rational decisions, advisors were bound by confidentiality and could do nothing other than what I did with Jane — ask questions and ultimately threaten to blow up the relationship.

Now when the advisor has concerns, they can contact the TCP (if one has been listed) and explain the situation. The advisor can also ask them to assist in talking to the client and assessing the situation. Obviously, no advisor wants to have a reason to call a client’s TCP, and in the vast majority of cases they will never hear from the advisor. 

That said, I would still STRONGLY encourage you to list a TCP with your advisor. The odds are exceedingly low that your advisor will ever have to reach out to them, but who knows? Maybe there will come a day when you are tired, flustered, or frustrated. Maybe you’re just not thinking clearly because someone you care about dearly just passed away or you have your own health concerns you’re worried about. Maybe you take one of those nefarious calls. Maybe you fall for it. Hopefully your advisor will question it. And if your advisor can’t get through to you, hopefully they will get a hold of that person you trust. And hopefully that person will be able to talk some sense into you.

Call your advisor today and make sure they know who you trust.

Arnold Machel, CFP® lives, works, and worships in the White Rock/South Surrey area. He is a Certified Financial Planner with IPC Investment Corporation and Visionvest Financial Planning & Services. Questions and comments can be directed to him at dr.rrsp@visionvest.ca or through his website at www.visionvest.ca. Please note that all comments are of a general nature and should not be relied upon as individual advice. The views and opinions expressed in this commentary are those of Arnold Machel and may not necessarily reflect those of IPC Investment Corporation. While every attempt is made to ensure accuracy, facts and figures are not guaranteed. 

Arnold is now accepting a limited number of invitations to speak. If you are interested in having him speak to your congregation or other group regarding money matters, please contact us at admin@visionvest.ca or (604) 542-2818 with your preferred date and time.