Clients often ask me if they can appoint their financial advisor/planner to be their Trustee, Power of Attorney, or Personal Representative (Executor). My response is that it may be a conflict of interest. Moreover, some firms prohibit their financial advisors from serving in these roles, so I tell clients to check with their financial advisor to determine if it is even allowable.
The Financial Industry Regulatory Authority, or FINRA, one of the regulatory body for many financial advisors, recently finalized Rule 3241, which will require a registered representative to get written approval from his or her firm before becoming a beneficiary, executor, or trustee, or assuming power of attorney on behalf of a client. This rule becomes effective on Feb. 15, 2021.
When this rule was proposed last year, FINRA noted that almost all firms already had policies prohibiting their financial advisors from becoming a beneficiary of a client’s Will, Trust or directly, but only some firms that policies with respect to serving as a Trustee or other fiduciary. In 2018, FINRA reported that numerous firms prohibited financial advisors from serving in fiduciary roles, while other firms had policies and procedures in place to minimize such conflicts.
While this rule is designed to protect all clients, it continues FINRA efforts to protect seniors from financial abuse.
If your documents include your financial advisor in any role, it is important to contact your financial advisor to find out if there is anything that needs to be done. Alternatively, your documents can be changed to remove the financial advisor and appoint a fiduciary who does not have an inherent conflict.