The Importance Of Trusted Contact Information

Registered investment advisors’ duty of care carries many responsibilities, and one of growing importance to the SEC is obtaining trusted contact information. While both clients and investment adviser representatives (“IARs”) may sometimes confuse a trusted contact with a beneficiary, it’s essential to understand the distinction. Below are key points to clarify when requesting trusted contact information from clients.

• Purpose: Trusted Contact Information is intended for situations in which the client cannot be reached, such as during a natural disaster, while the client is traveling, amid health concerns or signs of diminished capacity, or when there is suspicious activity related to the client’s account(s).
• Applicability: Trusted contact information should be obtained for all clients, regardless of age.
• Trusted Contact’s Role: A trusted contact may be called upon to verify the client’s current contact details, health status, or the identity of any legal guardian, executor, trustee, or power of attorney. 
• Limitations: Being designated as a trusted contact does not grant an individual the authority to act on the client’s behalf, nor does it confer any legal powers, such as those held by a power of attorney, legal guardian, trustee, or executor. A trusted contact cannot access account-specific information, such as balances or holdings, nor can they initiate transactions.
• Regulatory Requirements: Industry regulators increasingly require RIAs to provide proof of documentation for clients’ trusted contacts during audits, to enhance security measures.
• Client Refusal: When a client declines to provide trusted contact information, it is recommended that the client sign documentation of their refusal, which should be archived with the RIA for compliance purposes.
• Trusted Contact vs. Beneficiary: Listing an individual as a beneficiary does not satisfy the requirements to be a trusted contact, and a beneficiary should not be treated as a trusted contact. Beneficiaries and trusted contacts are separate designations with distinct purposes and responsibilities.

By helping clients understand the importance of this information, RIAs can better protect them and strengthen their compliance with regulatory standards.

To make sure that your firm is fully compliant with these regulations and to address any questions you may have, schedule a consultation with AdvisorLaw's compliance experts today. We can help you develop a comprehensive plan to obtain and maintain accurate trusted contact information for all your clients.