When client communication may not be from your client

This article appears in the November 2021 issue of Advisor’s Edge magazine. Subscribe to the print edition, read the digital edition or read the articles online.

The quandary

Your client prefers to speak to you on the phone or in person, though she has sent you emails before. You receive an email from her saying she’s abroad and arranging her elderly mother’s funeral — a trip you knew about. She wants to redeem $80,000 in a hurry for funeral and other expenses. How do you proceed?

To contribute your own ethical dilemmas or conduct quandaries, please email Michelle Schriver.

The experts

Al Jones President at A. Jones Wealth and Estate Planning in Barrie, Ont.

The situation raises red flags. If a client needed that amount of money, they would discuss it with me ahead of time because it requires planning. Also, funeral homes often don’t need payment upfront; they wait for life insurance proceeds.

I would email the client to set up a call or video conference so we can have a proper dialogue and I could assess that the client wasn’t under pressure.

If the client didn’t respond, I’d continue trying to contact her so she’d know about the potentially compromised email account. A trusted contact person or family member could also be called. I have a background in social work and use genograms — family tree diagrams — to understand clients’ family dynamics, so I’d know who to call. The client’s children may even be my clients.

If I spoke to a family member, I’d ask whether they knew how to reach the client, but I wouldn’t reveal any private information.

To verify client email generally, I send a separate email to the client, and they respond with a piece of information that we’ve established in advance.

Andrea Andersen Financial advisor with Edward Jones in Calgary, Alta.

Knowing my clients well means I’m likely to know when they’re on a trip like this. Regardless, I have a responsibility to protect clients, and instructions require speaking with the client, so I’d phone her or text her using the firm’s secure portal.

In fact, anything beyond scheduling an appointment or asking for directions is typically done by phone. (I’ve told clients not to send private information via email, and some of them attended the firm’s fraud prevention presentations a couple of years ago.)

I would also need to help the client understand how the large withdrawal would affect her plan, and document that conversation.

If I couldn’t reach the client and suspected she was vulnerable to fraud or incapacity, I’d call her trusted contact, after getting approval from compliance. I typically get clients to name a trusted contact early in our relationship, presenting it as part of our information-sharing conversation, not just a way to mitigate risk.

Disciplinary action

This year, FP Canada suspended a financial planner’s certification for six months for redeeming $500,000 in a client’s account based on emails, which were fraudulent. The Mutual Fund Dealers Association of Canada had previously fined the rep $10,000 for the misconduct. According to the MFDA, the rep didn’t phone the client to confirm the email instructions before processing the redemption and depositing the funds in a third-party bank account. The panel noted the misconduct was unintentional.

FP Canada suspended a different planner in 2019 for similar reasons. The planner told her firm she verified the fraudulent email instructions by phone, which wasn’t true. In issuing a $5,000 fine, the MFDA said the rep’s “good intentions” didn’t excuse the misconduct. “Emails from a purported client who simultaneously asks for money and begs off discussing it over the telephone should remind an approved person of the need to follow procedures, not provoke her into skirting them out of a misplaced sense of urgency,” the decision stated.