Why it’s important to name a trusted contact for your financial accounts

Connecting your bank or insurer with someone who knows what’s going on in your life could protect your money

Naming a trusted contact doesn’t give that person authority over your accounts or the ability to see balances or make changes. Getty Images

For the past few years, financial services companies have been bugging me to name a “trusted contact”.

Banks, brokers 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 travelling and hard to reach.

Helping your broker, 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,” says Amanda Singleton, an estate planning attorney in Florida.

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, says Gerri Walsh, senior vice president of investor education at the Financial Industry Regulatory Authority.

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. If you’ve died, your trusted person could provide contact information for the executor of your estate or the successor trustee of your living trust.

You aren’t required to name a trusted contact, but financial services companies — along with 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, an attorney or some other trusted person that the financial institution can reach out to for extra help to try to reach you,” says Deborah Royster, assistant director for the Consumer Financial Protection Bureau’s Office for Older Americans.

A trusted contact could thwart fraud

The push to name trusted contacts started out of concern for older Americans being scammed out of their life savings.

More than 369,000 cases of financial fraud of older adults are reported to authorities each year, causing an estimated $4.84 billion in losses, said a January report by cyber security research company Comparitech.

But this kind of fraud is notoriously underreported, often because victims are embarrassed, worried that others will think them incapable or protective of the perpetrators, who may be loved ones, caregivers or neighbours.

Comparitech estimates the real toll may be 8.68 million cases and more than $113.7bn in losses each year.

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, Finra’s Mr Walsh says.

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, says Abby Schneiderman , co-founder and co-chief executive of the end-of-life planning site Everplans 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,” Mr Schneiderman says.