Encourage your dealer to establish a trusted contact person procedure and form.
As clients age, they can become more vulnerable to both cognitive impairment and fraud, and advisors are often in the best position to see changes in financial behaviour that may indicate a problem. But what can you do if you have concerns about a client’s diminished mental capacity or possible financial exploitation?
New recommendations from the Canadian Securities Administrators (CSA) aim to empower advisors by encouraging them to ask clients for the name of a “trusted contact person” (TCP). When you have a TCP on file, you have someone your client has specifically chosen whom you can alert if you suspect something is amiss. It’s a powerful extra level of protection for your clients and for you.
If your dealer does not already have a procedure and form regarding the TCP, you should encourage them to establish one. You should not undertake a TCP process without dealer oversight and policy.
What a TCP is and isn't
A TCP is a close friend, family member or caregiver your client trusts with his or her personal information. A TCP is not the same as a power of attorney, who has authority to make financial decisions on your client’s behalf under certain circumstances, such as if your client becomes incapacitated. In fact, the TCP should have no interest or involvement in making financial decisions for your client. After all, you may need to reach out to the TCP if you feel the client’s power of attorney isn’t acting appropriately.
It’s also important to note that naming a TCP is not authority for you, the advisor, to share information with the TCP about your client’s financial accounts, assets or holdings, unless the client has given specific permission for this. When you speak with a TCP, you should limit your conversation to the bounds of your client’s consent and only disclose details the TCP needs to understand the situation and get the appropriate help for the client.
When to contact a TCPThe CSA has put together a list of red flags that may indicate a need to contact a client’s TCP.1
Early warning signs of diminished mental capacity may include:
Early warning signs of financial exploitation may include:
It is best practice to contact your dealer’s compliance branch manager or legal counsel to notify them of any early warning signs you identify.
What to say to a TCP
When you call a TCP, start the conversation by explaining the role. Ideally, the client has already done this, but it is important to reiterate the level of trust the client has placed in the TCP and confirm that they accept the role. Then keep your discussion narrowly focused on your concerns, without sharing unnecessary additional information about the client’s financial situation.
It is good practice to keep a summary of your conversation with the TCP in your client’s file and to inform your dealer’s compliance branch manager. Include details about what information you shared, what information you received from the TCP and any next steps you discussed.