The Value of Choosing a Trusted Contact Person

In recent years, securities regulators across Canada have worked to bring in new standards to improve “Know Your Client” (KYC) rules and protect investors – particularly older adults and vulnerable investors – from fraud and potential financial implications of cognitive decline.

A key result of this work is the Trusted Contact Person initiative. Trusted contacts are selected and appointed by investors. In turn, financial advisors can connect with trusted contacts if they suspect their clients are making irrational decisions for any number of reasons including:

  • injury, accident or fraud;
  • diminished mental capacity; or
  • age-related illnesses such as dementia.

It’s not just older adults that can benefit from appointing a Trusted Contact Person. Investors of any age can suffer financial exploitation or cognitive decline. There are, however, important aspects of the trusted contact role that investors should consider carefully.

Recent Regulatory Changes Clarify Key Role

First, a bit of history. Government of Canada research shows that financial abuse is the most common form of elder abuse. It can be difficult to identify and often occurs over long periods of time. Regulators believe financial advisors are in a unique position to recognize clients suffering from financial exploitation or cognitive decline.

In 2021, Canadian securities rules took effect that encourage investment advisors to work with their clients to appoint a Trusted Contact Person and obtain written consent to contact that person in specific circumstances. These changes are known as Client Focused Reforms. At the same time, regulators allowed advisors and their firms to place temporary holds on client transactions, withdrawals and transfers if advisors become concerned about financial exploitation or if a client is showing signs of diminished mental capacity that would impact their ability to make financial decisions. Together, the rule changes enable advisors and wealth management firms to play a bigger role in protecting older Canadians and other vulnerable clients.

Client Focused Reforms strike a balance between investor protection, recognition of the needs and priorities of older and vulnerable investors, and respect for client autonomy.

Trusted Contacts Are Just That

Canadian securities regulators expect registered investment advisors to take reasonable steps to collect Trusted Contact Person information from existing clients when they update KYC (Know Your Client) information.

Selecting the right Trusted Contact Person is key. This person should be someone an investor trusts and communicates with regularly. It may be a family member, attorney, accountant or another responsible person who respects the investor’s privacy and has the investor’s best interests at heart. A Trusted Contact Person should be familiar with the investor’s personal circumstances.

It’s important to note that the Trusted Contact Person is not the same as a power of attorney, which has the authority to make financial decisions on an investor’s behalf. Trusted contacts do not have any authority over accounts, cannot make decisions on an investor’s behalf, and will not be given access to detailed account information.

A Trusted Contact Person should not be your investment advisor or be involved in your financial decision-making process. You may appoint more than one trusted contact, and can ask your financial advisor to add or change a trusted contact for your account at any time.

Investors Help Define the Trusted Contact Person Relationship

A registered investment advisor contacts a trusted contact in limited circumstances only, with the investor’s written consent, to provide or confirm information such as an investor’s location, contact information, health status or the identity of any legal guardian, executor, trustee or holder of a power of attorney.

An advisor may also contact a trusted contact with:

  • concerns about the investor’s mental capacity to make financial decisions;
  • facts suggesting that an investor might act in a manner that would jeopardize their assets; and
  • concerns that an investor is being scammed.

Notify Trusted Contacts of Their Important Role

It’s important to notify the Trusted Contact Person of their status, inform them of the role they have been asked to fill, and ensure they understand the types of information they may be asked to provide to a registered advisor. The BC Securities Commission has developed a Trusted Contact Person form that investors can complete for their registered advisors and to notify their TCPs. It includes:

  • the name of the investment firm, the investment advisor and contact information;
  • detail on the trusted contact role and why the trusted contact may be contacted; and
  • the types of questions the advisor may ask the trusted contact.

Wealth management companies may also have their own Trusted Contact Person form. It’s important for investors to review these forms in detail, to understand what the investment advisor will share with the trusted contact and whether the investment firm is seeking special considerations, such as indemnification from legal action in case of errors.

With the introduction of trusted contacts, investors receive another layer of protection. While it is not mandatory for investors to name a Trusted Contact Person, it is a tool that can help safeguard your financial assets. If you haven’t appointed a Trusted Contact Person, speak to your registered investment advisor about naming one.

Report a Concern

If you have any concerns about a person or company offering an investment opportunity, please contact BCSC Inquiries at 604-899-6854 or 1-800-373-6393 or through e-mail at [email protected]. You can also file a complaint anonymously using the BCSC’s online complaint form.

InvestRight.org is the British Columbia Securities Commission’s investor education website. Subscribe to receive email updates from BCSC InvestRight.

Suggested Reading

How to Start a Conversation About Elder Financial Abuse

Four Tips to Manage Your Investments in 2022

Putting Investors First: Client Focused Reforms and Relationship Disclosure

More Resources

Working with an Investment Advisor

Establishing a TCP goes a long way in ensuring your financial well-being. Here are some things to consider before appointing a TCP.

Elder Financial Abuse

Establishing a TCP goes a long way in ensuring your financial well-being. Here are some things to consider before appointing a TCP.