Naming a 'trusted contact' on your accounts is more crucial than ever

For the past few years, financial services companies have been bugging me to name a ‘trusted contact’, or the contact detail of anyone credible apart from myself. Banks, brokerages and insurers increasingly want to have someone to call or email in case they notice suspicious activity and can't reach the account holder.

I ignored these requests. Trusted contacts are a great idea for older people experiencing cognitive decline, I thought, but that's not me. Then a younger friend developed early-onset dementia, and I realised we don't always get enough warning to put such protections in place.

Clearly, trusted contacts aren't just good for older people. Anyone's financial accounts could be vulnerable if they're displaced by natural disaster, wind up in the hospital, suffer a brain injury or are traveling and hard to reach. Helping your brokerage, bank or insurer connect with someone who knows what's going on in your life could protect your money and prevent financial catastrophe.

“I love the idea of the trusted contact, because it can really head off any fraud or exploitation before it snowballs out of control,” said Amanda Singleton, a US-based family caregiving and finance expert.

Trusted contacts can't make changes

Naming a trusted contact doesn't give that person authority over your accounts or the ability to see balances or make changes, explains Gerri Walsh, senior vice president of investor education at a non-governmental organisation that regulates the securities industry, including brokerages in the US.

Instead, your trusted contact can help financial services companies reach you (if you're reachable) or identify others who might help. If you're incapacitated, for example, your contact might connect the company to your legal guardian or the person with power of attorney over your accounts.

You aren't required to name a trusted contact, but financial services companies – along with global regulators and consumer advocates – recommend it. You can change your trusted contact whenever you want, or name more than one. Ideally, a trusted contact is someone you're confident will protect your privacy and act responsibly.

“It could be an adult child, a close friend, a lawyer or some other trusted person that the financial institution can reach out to for extra help to try to reach you,” said Deborah Royster, an assistant director at the US Consumer Financial Protection Bureau.

A trusted contact could thwart fraud

The industry-wide global push to name trusted contacts started out of concern for older people being scammed out of their life savings. More than 369,000 cases of financial fraud of older adults are reported to authorities each year worldwide, causing an estimated $4.84 billion in losses, according to a January report by a cybersecurity research company.

But this kind of fraud is notoriously underreported, as often because victims are embarrassed, worried others will think them incapable, or protective of the perpetrators, who may be loved ones, caregivers or neighbours. The cybersecurity firm estimates the real toll may be 8.68 million cases and more than $113.7 billion in losses each year.

To help reduce that toll, new regulatory rules are constantly being implemented. Some rules allow global brokerages to put temporary holds on withdrawals when financial exploitation is suspected, and the another norm requires brokerages to “make reasonable efforts” to get customers to name trusted contacts.

Other financial services companies such as banks, credit unions and insurers are looking to implement such rules worldwide. Even so, some are offering the opportunity to name trusted contacts on accounts, Royster added.

Beware fraudulent email requests

One thing you shouldn't do is respond to emails that seem to be from your financial institution asking you to name a trusted contact. Those may be scams to steal your passwords or create other havoc, Walsh added. Instead of replying to those emails, consider calling your financial institution or looking on its website for a form that lets you name a trusted contact.

If your financial institutions offer the option, it's a relatively quick and easy way to add a layer of protection on your accounts, said Abby Schneiderman , co-founder and co-CEO of an end-of-life planning website and co-author of ‘In Case You Get Hit by a Bus: How to Organise Your Life Now for When You're Not Around Later.’

“People should take two minutes out of their day and name a trusted contact,” Schneiderman added.