When crisis strikes, does your firm have a continuity plan?

Mint

3 days ago

It's a curious paradox in our profession: Financial advisors spend their careers helping clients plan for potential pitfalls, yet many haven't mapped out a clear vision for their own businesses should they be unexpectedly sidelined.
'Future-proofing" an advisory practice starts with something rather practical: protecting the business you've built. When a life-altering crisis hits, the difference between stability and chaos often comes down to one thing: having a plan.
Before thinking about planned transitions and long-term ownership shifts, a wealth management leader must feel confident answering the question: 'If something were to happen to me tomorrow, what would happen to my business?"
Private Advisor Group navigated this when our co-founder, John Hyland, was diagnosed with acute myeloid leukemia, a serious and fast-moving cancer.
Thanks to the continuity plan in place through our co-founder Pat Sullivan and others, the practice was able to continue operating and John began treatment immediately. Today, John continues his health journey, with a team of advisors supporting his book of business.
There are several ways, involving varying levels of complexities, to set up a protection plan for your practice in case of the death or incapacitation of a firm leader. These are areas to address now, with an eye toward preserving and enhancing the firm's value and protecting your clients and team:
Establish continuity. One solution is to align with another advisory firm that shares your values and serves a similar client base. That relationship can begin with a basic contingency agreement that outlines who would step in during an emergency and provides foundational guidance to ensure continuity of client care. What begins as a continuity plan often develops into a more comprehensive partnership over the advisors' lifetimes.
There are also broker-dealers and large RIAs that provide built-in continuity support solutions. Private Advisor Group, for instance, offers a buy/sell agreement that outlines the terms and conditions for the transfer of ownership, activating in the event of death or incapacitation.
While it isn't a substitute for full continuity and succession planning, it minimizes chaos, ensures that client needs will be met, and that beneficiaries receive the value of the business as the principal advisor intended.
Write it all down and then talk it up. One of the most essential components of a crisis continuity plan is operational clarity. A clear and comprehensive document containing processes for how the business runs day-to-day helps reduce disruption and maintain the expected levels of client service—critical to retaining client relationships.
It should all be written down: how a firm onboards clients and employees, how it communicates during market volatility, how the firm's technology is used, and how to contact important partners.
Further, a firm's investment management knowledge often resides solely in the head, or on the computer, of one advisor. If something were to happen, it's challenging for a new advisor to step in and recreate that custom experience for continuity purposes.
That's why we continue to encourage centralized portfolio management. Advisors should ensure the value being delivered to investors doesn't stop if the rainmaker can't be in the office.
Revisit these standard operating procedures at least annually and be sure to discuss updates with key personnel, as well as with continuity and succession partners.
Bring clients along. Lastly—and perhaps most important—talk to your clients about your plans.
Firms can prevent attrition by ensuring that clients know who to call if they are unable to reach their advisor. Many advisors issue an annual reminder of 'who to contact in my absence" to clients and key team members as part of the firm's continuity plan, a best practice we strongly endorse.
Future-proofing your practice is about honoring the work you've put in, protecting your team and family, and ensuring what you've built continues to serve your clients and community long after you've stepped away.
And like most other planning you do for your clients, the earlier you start the better off you and everyone else will be.
Frank Smith is the CEO of Private Advisor Group. With over 20 years of financial services experience, he previously served as director of Investment Solutions at CUNA Mutual Group and senior vice president of Enterprise Business Consulting and RIA Solutions at LPL Financial.