Article June 20, 2023

Mission: Supporting the advisor of a vulnerable client

Advisors sometimes find themselves caught between a rock and a hard place when it comes to choosing between protecting their clients' privacy and providing assistance to those who are becoming more vulnerable. Designating a trusted contact person can help resolve this dilemma.

The National Bank Financial (NBF), which comprises full-service advisors, began considering the use of a trusted contact person for their clients in 2016, a few years before the Autorité des marchés financiers (AMF) mentioned this possibility in its regulations.

"Our service received many questions from our investment advisors regarding how they could and should act when they suspected their clients were victims of financial exploitation or were unable to manage their investments," explains Marie-Emmanuèle Cardinal, Associate Vice President for Client Relations and Complaints at National Bank Financial.

Cardinal's team developed a guide to support advisors in these situations, as well as a form to designate a "third party" that the advisor could contact to discuss their client under certain circumstances. "What often came up in these cases was the difficulty for advisors to communicate with their clients and the need to involve another person," adds the vice-president. "It was challenging to assist them."

NBF paid particular attention to the circumstances in which the advisor could engage with this contact person. It is a delicate matter in the industry as it concerns the preservation of client privacy and confidential information. The financial institution has also provided, and continues to provide, extensive training to its advisors, in addition to offering personalized support in certain situations.


No more grey area

In 2021, the AMF amended its Regulation 31-103 of the Securities Act to include provisions regarding the designation of a trusted contact person. This was part of broader changes aimed at enhancing the protection of elderly and vulnerable clients. Article 13.2 now requires registered individuals to take "reasonable steps to obtain from the client the name and contact information of a trusted person and the client's written consent to communicate with them."

"This regulatory change legitimized a practice that existed previously but fell into a grey area," explains Jean-François Levasseur, Chief Compliance Officer at the Quebec Bar Services Corporation. "Advisors could sometimes contact a client's family member in case of a problem, but they always feared violating confidentiality rules." The Code of Ethics of the Chambre de la sécurité financière (Art. 27) and the Regulation respecting the rules of ethics in the securities sector (Art. 8, 9, 17) strictly regulate the preservation of confidentiality.

Her colleague Carine Monge, General Manager and Designated Person in Charge at the Quebec Bar Services Corporation, points out that clients are not obliged to designate a trusted contact person. Advisors have an obligation to make efforts but not an obligation to achieve results. "They must clearly explain to their clients what designating a contact person entails and emphasize how it can help prevent certain problems and even avoid more complex disputes later on," she warns.


A very limited role

One way to reassure clients is to clearly describe the limited and regulated role of the contact person. "This person has no rights with respect to the client's assets, nor any decision-making power," explains Isabelle Tremblay, a lawyer at Le droit chemin Legal Advisory Firm, specializing in insurance and investment products. "For example, they cannot request the execution or blocking of a transaction. They are simply a person the advisor can turn to, to sound the alarm about a particular situation."

The concept of a trusted contact person is therefore unrelated to the recently created role of an assistant by the Public Curator. This new measure allows a client to officially appoint someone to assist them in certain decision-making or asset management, without relinquishing any of their rights. With the client's consent, the assistant may also have access to the client's confidential information. The assistant is designated after a verification and interview process conducted by the Public Curator.

"The process of designating a trusted contact person is much simpler and informal," notes Tremblay. "The client must provide the name and contact information of the person, ideally after informing them. However, individuals who have already been declared unfit cannot propose a contact person."


Follow the guide

The remaining challenge for advisors is determining the situations in which it is justified to involve the contact person. "The advisor must ensure that it is necessary and ideally obtain the client's consent, which sometimes requires a lot of listening and education, especially with a client experiencing cognitive decline," says Jean-François Levasseur.

Regulation 31-103 stipulates that the client authorizes the advisor to communicate with the trusted contact person for four specific reasons:

  1. Concerns about possible financial exploitation of the client;
  2. Concerns about the client's mental capacity, which could compromise their ability to make financial decisions;
  3. Obtaining the name and contact information of a legal representative of the client;
  4. Obtaining the client's contact information (when the advisor is no longer able to reach them).

The AMF has also published the guide Protecting Vulnerable Clients, which provides several recommendations regarding the trusted contact person. It even includes a model authorization form to communicate with a contact person.

Regardless of the approach taken, advisors must ensure they protect themselves. "It is essential to document all these processes well, including obtaining the client's consent, designating the trusted contact person, and the decision to contact them," reminds Monge. "When possible, it is a good idea to seek a second opinion, such as from a supervisor, to confirm that the time has come to use this measure."