A New Question from your Broker

By Jillian Sarmo, Investor Education and Public Affairs Coordinator ~

The world is complicated, and as much as we sometimes don’t want to admit that we need help from time to time, we all do. This can be especially true when it comes to our financial well-being, and is perhaps most important to recognize and accept as we age. Financial exploitation of people over the age of fifty-five can take many forms, from email, mail, and phone scams perpetrated by strangers to theft, manipulation, and coercion from family members, friends or caregivers. This is an unfortunate reality, but luckily regulators and members of the financial industry have been working to come up with some easy, painless ways to help ensure that if you or a loved one is ever targeted by exploitation, something can be done about it before the hard-earned money is in the hands of a crook. Recently, the Financial Industry Regulatory Authority (also known as FINRA) enacted a rule to empower investors and assist brokerage firms in protecting clients. This new account protection tool is called the Trusted Party Rule, and I encourage everyone, young and old, to question your registered representative about it at your next meeting (if he or she doesn’t bring it up with you, first).

Jillian Sarmo

Jillian Sarmo

According to FINRA’s rule, brokerage firms must ask their retail customers to provide the name and contact information for a “trusted contact person” who can be reached if the firm suspects fraud or exploitation is occurring or might be about to take place. It’s important to note that you do retain the right to refuse to provide this information, but if there is a trusted son, daughter, or person in your life, it’s an excellent idea to give your brokerage firm permission to contact them in the event of questions or concerns.

When discussing this rule, and a similar provision in a law passed through the efforts of the Division of Securities in 2017, there are often questions raised about privacy, independence, and the possibility that the trusted third party may turn out to be someone who shouldn’t have access to an account. Let us address these concerns one at a time. Third party rules and provisions are not meant to violate your privacy, or to invite intruding or prying eyes into your financial situation. That’s why it’s important that you, the client, is given the ability to choose whomever you feel is the best person to potentially be contacted if you are sick, incapacitated, or otherwise unable to make financial decisions. Some state provisions are now allowing firms to contact a third party in the event of suspected exploitation regardless of whether one has been selected specifically by the client. Wouldn’t you rather be in control and know who that person is before something happens?

These rules are also not intended to take away any of your independence or autonomy. Many people question how this provision is different from a Power of Attorney, or assume that most people will simply select their POA as this contact, but we actually advise against it. The trusted third party will not have the powers or access to accounts that a POA might. Rather, he or she will simply be someone who can assist a firm in next steps should your account be compromised, or can inform a firm if you have fallen ill or changed locations. Obviously, when we say “trusted” party we would not want you to select someone who does not have your complete faith. However, in the event that someone identified as a trusted party turns out to be a perpetrator of exploitation, he or she will not have been given access to the funds in your accounts, and the firm, along with regulators, will be able to identify other methods whereby we can keep your money safe.

Remember, insurance policies that we buy for our health, automobiles, and homes are necessary means by which we can protect ourselves and what’s important to us. They are “Plan Bs” that we hope to never have to use, but are always thankful are in place when the need arises. Unlike insurance plans, third party provisions at brokerage and advisory firms are free, and provide similar protections for your hard-earned wealth and savings. I urge you to consider advising your registered representative of such a contact at your next meeting.

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