Each Charles Schwab account application has a section which gather’s details on a trusted contact. On Charles Schwab’s account applications now, they explain this designation as:

A Trusted Contact Person (“Trusted Contact”)* is a resource Schwab, and your advisor (if you have one), may contact on your behalf, if necessary, to attempt to address concerns regarding potential financial exploitation, or in communicating with you regarding issues related to your account(s). A Trusted Contact will not be able to view your account information, execute transactions in your account(s), or inquire about account activity, unless that person has that authority through another role on the account(s), such as a trustee or power of attorney. Providing Schwab with Trusted Contact information is voluntary. We encourage you to provide two Trusted Contacts in the event that one is not reachable in the future.

• Schwab suggests that your Trusted Contact(s) be someone other than your Financial Consultant or Investment Advisor.
• You may name up to two Trusted Contacts.
• The person(s) you name as Trusted Contact(s) will be the Trusted Contact(s) on all of your Schwab accounts, as provided for in your account
  agreement.
• For multiple-party accounts, each party can name separate Trusted Contacts.
• The Trusted Contact(s) must be at least 18 years old.

The asterisk goes to a footnote which reads:

*If you provide a Trusted Contact Person(s) to Schwab, you understand that you have authorized Schwab and your Advisor (if you have one) to contact the Trusted Contact Person(s) at their discretion and to disclose information about your account to address possible activities that might indicate financial exploitation of you; to confirm the specifics of your current contact information, health status (including physical or mental capacity), or the identity of any legal guardian, executor, trustee, or holder of a power of attorney on your account(s); or as otherwise permitted by FINRA rules or state law. For more information, please see your Schwab Account Agreement, which is available at www.schwab.com/accountagreement.

Trusted contact is not an idea unique to Schwab. FINRA requires brokerage firms to ask customers for a trusted contact without making it necessary to open an account. FINRA’s explanation for why you might want a trusted contact is:

Maybe you’re traveling. Maybe you’ve been displaced by a natural disaster. Maybe there’s a concern about fraud. Or maybe you’re having a health issue. A trusted contact can help your firm connect with you.

In an Investor Bulletin on the subject of trusted contacts , the SEC defines a trusted contact as:

A “trusted contact person” is a person that you authorize your brokerage firm to contact if your broker has a reasonable belief that your account may be exposed to possible financial exploitation or fraud.

They go on to list the following possible reasons a brokerage firm might contact a trusted contact as:

• Addressing possible financial exploitation or fraud in your account.
• Confirming your current contact information, if your brokerage firm cannot reach you.
• Confirming your current health status, if your brokerage firm suspects you are sick or suffering from diminished capacity .
• Confirming the identity of any legal guardian, executor, trustee or holder of a power of attorney on your account.

Charles Schwab describes a trusted contact as a person who Charles Schwab has permission to reach out to “to confirm your current contact information, your health status, or the contact information for other authorized parties on the account, such as a power of attorney.”

Charles Schwab also extends the permission to communicate a trusted contact to “your Advisor (if you have one).” For our clients, this would mean that we at Marotta Wealth Management can also contact your trusted contact for the same list of reasons.

Unlike a durable power of attorney (DPOA) agent, a trusted contact has no authority to act on your behalf. Furthermore, it is unclear if Charles Schwab will ever actually use their authority to contact your trusted contact.

For example, when a client’s mail from Schwab is forwarded to a new address or returned to sender, Schwab will put an undelivered mail restriction on the account. For our clients, they will simply alert us of the problem and wait for us to assist them in updating the address. Perhaps in this case for a Schwab client with no advisor, they would use a trusted contact?

However, if you are mentally incapacitated, neither your trusted contact nor your financial advisor can provide you with the financial coverage you need. While it is possible a trusted contact may provide you with some limited assistance, you need a durable power of attorney to create a true back-up of protection in the event of your need.

Estate planning is a task which is never useful until it is too late to do it. If you haven’t made a durable power of attorney yet, consider whether there is a person you would feel comfortable granting powers under a Schwab DPOA today. If you are a client of ours, we have notary services available and would be happy to assist with Paperwork Preparation.

Photo by Ilyuza Mingazova on Unsplash. Image has been cropped.