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May 03, 2022
9 min read

Cover your assets with a trusted contact person

Have you designated a Trusted Contact Person? In situations like where your advisor suspects you may be a victim of cybercrime or has reason to believe an aging-related health issue may be impacting your decision-making ability, this added layer of security can be a benefit to your financial well being.

Bernadette joined CWB McLean & Partners' Client Portfolio Management team in September 2020. She is passionate about assimilating and explaining investment products, strategies and plans into comprehensible solutions for her clients, in order to provide greater reassurance and understanding.

We’ve all read headlines such as Senior conned out of thousands in fake investment scheme or heard of an emotionally vulnerable person falling prey to an online scam. These incidents are becoming more common so the Canadian Securities Administrators (CSA), and l’Autorité des Marchés Financiers (AMF) in Quebec, have taken action to help mitigate this risk. 

This year, the Canadian Securities Administrators released the notice of amendments to National Instrument 31-103, more commonly known as Know Your Client (KYC). The amendments further strengthen client-focused reforms by mandating that financial advisors take reasonable steps to encourage a client to name a trusted contact person (TCP) to help safeguard their well-being.

What is a TCP and what authority do they have?

A TCP is someone identified by a client whom a financial advisor may contact, according to the client’s express written consent, should there be sufficient reason to believe the client’s financial security may be compromised. The role of a TCP is to help protect the client’s financial interests or assets if it’s suspected that they’re being financially exploited or are in a state of diminished mental capacity.  

Wealth management professionals are in a good position to recognize changes in a client’s behaviour that could be the result of diminished mental or physical incapacity. This is because, as trusted professionals who have longstanding relationships with their clients, they’re able to detect changes in behavior and/or requests for unusual withdrawals/transfers that are not part of the client’s agreed upon financial plan. They can also see if the client is confused and can’t understand concepts that they previously understood.

In limited circumstances, a TCP may be asked to confirm certain information if it’s suspected that someone may be financially exploiting the client, or if the client is facing health challenges. But the key function of a TCP is only to provide or confirm information. They do not have any authority or decision-making capabilities on a client’s account. 

When designating a TCP, you can instruct your advisor on exactly which events they may contact them about. For example, concerns about diminished capacity or financial exploitation, or to contact certain individuals like legal guardians, your Power of Attorney (POA), or other legal representatives. It’s important to note that assigning a TCP is not mandatory and you can change the person you’ve named as a TCP, or withdraw from assigning one altogether, at any time.

What’s the difference between a TCP and POA?

Assigning a TCP to your account doesn’t grant them any authority to view your account or execute transactions on your behalf. They cannot make any financial or health-related decisions on your behalf either. When contacting your TCP, your advisor may only discuss their specific concerns with them. 

Alternatively, when you designate an individual as a POA (or Mandate in Quebec), you execute a legally-binding document granting the individual permission to make financial decisions on your behalf should you be unable or simply choose to abstain. 

How would having a TCP help me?

Several circumstances could arise where having a TCP could be of benefit to you and your family’s financial well being. Some examples are:

  • If your advisor suspects that you could be the victim of a cybercrime or fraud
  • If your advisor has reason to believe that an aging-related health issue may be impacting your decision-making ability
  • If you’re travelling and your advisor needs to get a hold of you to confirm information, or your advisor has lost contact with you for reasons that cannot be directly confirmed (e.g., you’ve moved and forgotten to update them or have been displaced by a natural disaster)  

Who should you consider appointing as your TCP?

A TCP can be anyone you wish, however, it would serve you best if the person you select isn’t already involved in making decisions on your accounts through having trading authorization or POA. By selecting someone who’s not currently connected to your accounts, you’re adding an additional layer of protection to help safeguard your accounts from potential financial exploitation. A TCP should be a close personal contact that you trust, who would be able to look for any significant changes in your behaviour and lifestyle.

What happens if your advisor suspects you’re the target of financial exploitation?

Let’s look at a couple of scenarios where a financial advisor, with the help of a TCP, can step in to ensure their client’s assets remain secure.

Scenario 1
Jim, a client who suffers from mild dementia, calls Mary, his advisor, and asks her to send him $150,000 from his RRIF. Jim normally only withdraws $50,000 per year. Naturally, Mary is suspicious as this is out of character for Jim, so she asks what he plans to do with these funds. He tells her that he received a call from his grandson, asking for bail money as he was arrested and is in a foreign jail. 

Given that this is a very unusual circumstance, Mary calls Jim’s TCP. After a brief discussion, she’s told that Jim has recently received calls from unknown locations and has been the victim of a telephone scam. 

Scenario 2
Susan has set up monthly withdrawals of $3000 from her RRSP account at XYZ firm, and has had this in place for three years since she retired. She begins calling her advisor, Ravi, each week asking for significantly more money. Her demeanor has changed and she’s no longer her talkative, friendly self, but very short and serious. Ravi feels this is unusual and is concerned, so he calls Susan’s TCP and learns that her adult son is now living with her after having lost his job. The TCP suspects that Susan may be in a vulnerable position. 

In these scenarios, the advisor has good reason to believe their client is the target of either financial fraud or abuse. So, their financial institution would have reasonable grounds to temporarily hold the client accounts until they can ensure that the client and their assets are safe.  

A few words on temporary holds

A temporary hold doesn’t typically apply to the entire client account but on specific purchases, sales, withdrawals, or transfers that appear suspect. Transactions unrelated to suspected financial exploitation or diminished mental capacity should not be subject to the temporary hold. However, if the transaction requested involves all the assets in the account, it may be reasonable to place a temporary hold on the entire account while not limiting the payment of regular expenses.

Your financial well-being is of utmost importance to your advisor. Naming a TCP gives you an added layer of protection, and lets you work together to safeguard your financial security. If you haven’t yet done so, it’s worth a conversation with your advisor to discuss scenarios in which a TCP could benefit you. 

Sources: Autorité des marches financiers, Aumlaw.com, Advisor.ca, securities-administrators.ca, finra.org, Canadian Securities Administrators, IIROC – The Strategy Counsel, McMillan LLP (mcmillan.ca)