By Roberta L. Nestor
On February 5, 2018 the Financial Industry Regulatory Agency (FINRA) put into effect two rules that address the financial exploitation of seniors and vulnerable adults. These new rules are the first uniform, national standards to protect senior investors. With the aging of our U.S. population, financial exploitation has become a serious and growing problem.
Adult Protective Services (APS) programs report that the number and complexity of reports involving financial abuse of vulnerable and older adults has grown significantly over the past decade.
- The rate of financial exploitation is extremely high, with 1 in 20 older adults indicating some form of perceived financial mistreatment occurring in the recent past.
- Only 1 in 44 cases of financial abuse is ever reported.
- Nearly 1 in 10 financial abuse victims will turn to Medicaid as a direct result of their own monies being stolen from them.
If you have recently met with a financial advisor, you might have been asked to provide the name and contact information for a “trusted contact person”. The trusted contact person is intended to be a resource for firms and their advisors to aid in protecting assets and to respond to any possible financial exploitation. In providing this information, you are authorizing your advisor to disclose information about your account in order to address possible financial exploitation. Your trusted contact has no authority to make transactions on your account and must be over age 18.
In having this discussion with your advisor, you might also want to make them aware of who would not be a trusted contact. Is there a person or family member you would not want to know anything about your financial situation? Advisors are often contacted directly by family members when the client has a health issue or is in a long-term care situation. Unfortunately, health issues, especially those that involve nursing care are when individuals are most vulnerable to financial abuse.
Let’s say, for example your advisor has been unable to contact you after multiple attempts. With this document your advisor would then be able to get in touch with your trusted contact to inquire about your current contact information (maybe you moved, changed phone numbers or eliminated your land line). Your advisor could reach out to a trusted contact if they suspect that you may be suffering from Alzheimer’s disease, dementia or other forms of diminished capacity.
The new rule allowing firms (broker/dealers) to place a temporary hold on invested assets provides them and their associated advisors with a safe harbor from certain FINRA rules. This provision will allow firms to investigate the matter and reach out to the customer, the trusted contact and, as appropriate, law enforcement or adult protective services, before disbursing funds when there is a reasonable belief of financial exploitation. It is a critical measure because of the difficulty investors’ face in trying to recover funds that they have inadvertently sent to fraudsters and scam artists. Your advisor could contact a trusted contact to address possible financial exploitation of the client before placing a hold on your accounts.
More information about the FINRA rule can be found at www.finra.org. Use the search key for “trusted contacts” and you will find more detailed information. It is an important conversation to have with your financial advisor.
Roberta L. Nestor is a financial advisor practicing at 491 New Haven Avenue in Milford, CT offering retirement, long term care, investment and tax planning services. She also offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network – a member FINRA/SIPC and a Registered Investment Adviser. Fixed insurance products offered through Nestor Financial Network are separate and unrelated to Commonwealth. Commonwealth Financial Network or Nestor Financial Network does not provide legal or tax advice. You should consult a legal or tax professional regarding your individual situation. Roberta can be reached at Nestor Financial Network, 203-876-8066 or firstname.lastname@example.org.