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November 20, 2012 at 07:00 PM
Succession planning has been a hot topic in the industry for the past couple of years. Many surveys have shown a dismally small percentage of advisors have created a plan for their own retirement, even as we decry the small percentage of Americans who have planned for their retirement.
The hue and cry over succession planning, however, misses the truly critical risk management issue facing advisors—the lack of a continuity plan for their practice. Although the term “continuity plan” is sometimes used to refer to a contingency or disaster recovery plan, I’d distinguish between the two. In a disaster—whether a fire in your office or something on the magnitude of Hurricane Sandy—the advisor is still available to make decisions, lead the staff and communicate with clients. A continuity plan helps get the staff, family and clients through a period when the advisor is unable to manage the business due to illness, injury or death.
Continuity planning should take priority over succession planning. If needed, a continuity plan is implemented immediately due to an unexpected disruption in your ability to work, rather than over a period of months or years like a succession plan. Also, a succession plan typically assumes you will not return to run the practice; a continuity plan must address the possibility that you will.
As part of your 2013 planning process, set up discussions with your staff and your family to brainstorm the question, “If I were in an accident tonight, what decisions would need to be made and what steps taken to ensure the business continues running in the short term?” Who from your family will inform your staff? Does that person have home or cell phone numbers for everyone on your staff? If that person is your spouse, do you have a Plan B if your spouse is also injured in the accident? Who will send communications to clients? When will they be sent and how? Who can sign checks in your absence, and are there specifics to things like funding payroll that only you know? When do your attorney, accountant or other key business relationships need to be informed? Will your family or staff take care of that?
