The Federal Reserve Bank of Philadelphia wants seniors to keep their financial accounts safe — and suggests listing what's known as a "trusted contact" so your bank, brokerage firm, or other finance company can call if it suspects fraud or financial elder abuse.
For years, banks and brokerage firms have wanted rules surrounding suspected fraud on customer accounts. For example, if a teller or broker sees an elderly client pulling large amounts of money out, or witnesses suspicious account activity, whom could he or she call?
No one, really — until now.
As of February 2018, regulators issued new "trusted contact" rules to help these firms list a person on your account whom you trust as a second set of eyes on your finances, according to the June 2018 paper "Combining Forces to Combat Elder Financial Victimization" by Philly Fed's Jeanne Rentezelas and Larry Santucci. A copy is available on the PhiladelphiaFed.org website.
For new accounts, you're automatically asked for a trusted contact. But for existing accounts, you must request for trusted contacts to be added. Call your bank or brokerage firm and ask if you can fill out the form — for yourself, your elderly parent or relative, or neighbor.
When is it appropriate for your banker or broker to get in touch with your trusted contact?
Let's say your broker has been unable to contact you after multiple attempts. He or she can now call or email your trusted contact person to inquire about you, if you're ill or infirm, and why you're unreachable.
Brokerage firms can also reach a trusted contact person if they suspect you suffer from Alzheimer's disease, dementia, or other forms of diminished physical or mental capacity. Or, if they suspect possible financial exploitation of a customer, they can call your trusted contact before placing a temporary hold on your funds.
Brokerage firms notify your trusted contact person orally or in writing if and when they want to place a temporary hold on funds or securities, unless they believe that the trusted contact person is engaged in the financial exploitation. A full copy of the new brokerage "trusted contact" rule is available on FINRA's website, at https://www.finra.org/.
The Securities and Exchange Commission also approved of the new FINRA Rule 2165 (Financial Exploitation of Specified Adults), which allows financial advisers to place temporary holds on disbursements of funds or securities "where there is a reasonable belief of financial exploitation." Registered investment advisers, too, now have to list the name of a trusted contact person for your account. (Remember, FINRA regulates brokers and the SEC regulators financial advisers, much to everyone's confusion. That's not changing anytime soon.)
In addition, you yourself can ask your financial institution to list one — or even two — sets of names and phone numbers as trusted contacts. These folks won't have access to your money — just eyes on your statements to look for red flags. You can also ask your bank, adviser, or broker:
Carol Alesi, eastern Pennsylvania market manager for Key Private Bank in Plymouth Meeting, hosted Key's chief investment strategist Bruce McCain last week here in Philly, and he, like many economists, thinks that even after last week's Federal Reserve rate hike, "we are still below [the] neutral rate and will remain so for the hikes currently contemplated through this year and the early part of next year."
The Fed last week raised its short-term interest rate target range by 0.25 percent to between 1.75 and 2.0 percent and said it will hike rates four times this year while upgrading its outlook for GDP and inflation. The Fed noted solid economic growth, declining unemployment, and a pickup in household spending. The relatively upbeat assessment included a projection for real GDP growth in 2018 of 2.8 percent, up from 2.7 percent.
The Fed dropped its unemployment forecast to 3.6 percent in 2018 (from 3.8 percent previously) and to 3.5 percent in 2019 and 2020, respectively (from 3.6 percent). On inflation, the Fed's median estimate for core PCE inflation rose to 2.1 percent in 2018 and 2019, up from 1.9 percent and 2.0 percent, respectively, according to TD Economics.