Trusted Contact Person: What It Is and Why You Should Name One

In an increasingly complex financial landscape, managing investments effectively requires careful planning, understanding, and oversight. One important feature available to all people who invest across Canada including our Alitis clients is the Trusted Contact Person (TCP). The role of a TCP is vital for ensuring the security of investors, particularly in safeguarding against potential issues related to mental capacity, fraud, or financial exploitation. This article will explore the concept of the Trusted Contact Person, why it is important, and how it works in the context of investment accounts in Canada. 

What is a Trusted Contact Person? 

A Trusted Contact Person is an individual designated by an investor to serve as a point of contact for their Portfolio Manager, financial advisor, or investment firm. The TCP can be consulted if there are concerns about the investor’s financial well-being, such as suspected cognitive decline, vulnerability to financial abuse, or unusual activity in the account. The TCP can also be consulted if the Portfolio Manager or investment firm has been unable to reach the investor with the contact information they have on file.   

Unlike a power of attorney (POA), a TCP does not have the authority to make decisions on behalf of the account holder. Their role is limited to providing information or insight to the financial advisor or institution in situations where the account holder may be at risk. The TCP can help the investment firm protect the investor’s best interests by allowing timely intervention before issues escalate. 

Why is the Trusted Contact Person Important? 

The importance of a TCP stems from the increasing need to protect investors, especially seniors, from financial exploitation and fraud. With Canada’s aging population and the associated risks of cognitive decline, it has become more important than ever to have safeguards in place to protect vulnerable investors. 

Here are several key reasons why a TCP is critical: 

1. Protecting Against Financial Exploitation: Financial exploitation is a growing concern, especially for elderly individuals who may be more vulnerable to manipulation or scams. By having a TCP in place, financial professionals can consult someone trustworthy if they notice any unusual transactions or signs of exploitation. 
2. Monitoring Cognitive Decline: Cognitive decline can happen gradually, and it may not always be evident to the individual affected. A TCP allows financial professionals and firms to take proactive steps if they observe behavior suggesting that the account holder is no longer able to manage their finances effectively. This can prevent substantial financial losses that might occur if the individual is making unwise financial decisions. 
3. Acting as a Liaison: The TCP can act as a liaison between the firm and the account holder’s family or other trusted individuals, ensuring that any potential issues are communicated and addressed. This is especially valuable in cases where the account holder lives alone or may not be in close contact with family members. 
4. Preventing Fraud and Scams: Fraudsters often target individuals who may be more trusting or vulnerable due to age, illness, or isolation. A TCP provides an additional layer of protection by allowing financial professionals to reach out to someone trustworthy if they suspect that the account holder is being targeted by a scam. 

How Does the Trusted Contact Person Work in Practice?

The concept of a Trusted Contact Person is relatively new in Canada, having been introduced by regulators in response to concerns about the vulnerability of investors, particularly seniors. The Canadian Securities Administrators (CSA) and the Investment Industry Regulatory Organization of Canada (IIROC)* have incorporated guidelines encouraging investment firms to ask clients for the name of a TCP when they open or update their accounts. 

Here’s how it typically works: 

1. Designating a TCP: When opening an investment account, clients are encouraged to designate a TCP. The process is voluntary, and clients can choose whether to provide a contact. While it is not mandatory, most financial institutions strongly recommend it for the client’s protection. 
2. Defining the Role: The client must understand that a TCP does not have the authority to make financial decisions, nor do they have access to account details. Instead, they serve as a resource to the financial institution in specific circumstances, including: 
   • • they need to get in touch but cannot after repeated attempts
     • to confirm your legal representation(s)
     • if financial exploitation is suspected
     • if concerns arise about the client’s ability to make sound decisions.
3. Consulting the TCP: If a Portfolio Manager or financial advisor notices red flags—such as inconsistent withdrawals, unusual transactions, or erratic behavior—they can contact the TCP to express concerns and gather more information. This step is taken with the intention of safeguarding the investor’s assets while respecting their autonomy.
4. Confidentiality: Financial institutions must handle any information shared with a TCP with the utmost confidentiality. They are only allowed to discuss concerns related to the investor’s well-being or possible financial exploitation. The actual details of the investment account are not disclosed without the client’s explicit permission. 

Who Should Be a Trusted Contact Person? 

Choosing the right TCP is a critical decision, as this person should be someone the investor trusts implicitly. The ideal candidate is typically a close family member, friend, or professional who knows the account holder well and has their best interests at heart. However, it’s important to choose someone who can act responsibly and who the investor believes will handle sensitive situations with care and discretion. 

Here are a few considerations for selecting a TCP: 

• Trustworthiness: The person should be someone the investor completely trusts to act in their best interest. 
• Availability: The TCP should be accessible and willing to communicate with the Portfolio Manager or financial institution if needed. 
• Understanding of the Investor’s Situation: Ideally, the TCP should have a good understanding of the investor’s financial situation and be familiar with their habits, goals, and concerns. 

Legal and Regulatory Framework in Canada 

The introduction of the Trusted Contact Person role reflects a broader effort by Canadian regulators to address the increasing vulnerability of certain investors, particularly the elderly. Both the CSA and IIROC* have issued guidelines that encourage investment firms to ask clients to name a TCP. 

In 2021, IIROC* introduced amendments to its rules, making it a requirement for financial professionals to ask clients for TCP information when opening an account. While providing a TCP is not mandatory, the advisors must explain its importance to the client. These regulatory measures aim to reduce the risk of financial exploitation and ensure that firms take an active role in protecting investors. 

Common Concerns and Misconceptions 

Despite the clear benefits, some investors may hesitate to designate a TCP due to misunderstandings about the role. Here are a few common concerns and how they can be addressed: 

1. Loss of Control: Some investors fear that naming a TCP might lead to a loss of control over their financial decisions. It’s important to reiterate that a TCP has no authority to make decisions or access account information unless explicitly authorized by the investor. 
2. Privacy Concerns: Others may worry about privacy. However, financial institutions are required to handle communications with the TCP confidentially, and no personal or account details are shared without the investor’s permission. 
3. Complexity: Some may view the process as unnecessarily complicated. In reality, designating a TCP is a simple step that offers significant protection without imposing any burdens on the investor. 

Alitis Can Help Establish Your Trusted Contact Person

The Trusted Contact Person (TCP) plays a vital role in the evolving landscape of investor protection in Canada. While this feature is voluntary, it represents an essential safeguard for investors, particularly those who may be vulnerable due to age, illness, or other factors. By designating a TCP, investors can enhance the safety of their investment accounts, ensure that trusted individuals can be contacted in times of need, and protect themselves from potential exploitation. Financial institutions and regulators in Canada are increasingly recognizing the importance of this role, making it a recommended practice for all investors to consider as part of their overall financial planning strategy. 

Alitis Investment Counsel strongly recommends our clients name a Trusted Contact Person and approve this person by signing our Trusted Contact Person Information and Authorization Form. If you would like to name a Trusted Contact Person, change your Trusted Contact Person, or are unsure if you have a Trusted Contact Person on file at Alitis, please contact your Portfolio Manager.  

Sincerely, 
Aaron Robertson, CIM®, CFP® 
Portfolio Manager, Head of Private Client