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Life Health > Running Your Business

Advisors Need a Continuity Plan More Than Ever: Echelon

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The ongoing coronavirus pandemic has highlighted why, now more than ever, advisors should have a true, comprehensive continuity plan that adequately prepares their firms, clients and families for the unexpected, according to Echelon Partners.

“I think this COVID pandemic has been a real wake-up call for many of us and it provides that fresh opportunity and perhaps the catalyst to help you put a proper continuity plan in place for your business, your clients, your employees and your estate,” Carolyn Armitage, a managing director at the firm, said Thursday during the webcast “Continuity Planning Solutions for Wealth Managers.”

It also presents a “tremendous opportunity for you to have another touchpoint with your clients and to let them know you’re prepared,” she told viewers.

Advisory firm owners “may not be thinking about continuity planning expressly right now” because of everything that is going on during these chaotic times, conceded Mark Bruno, another managing director at Echelon. However, the coronavirus crisis has made it abundantly clear “what some of the gaps are … in existing continuity plans.”

You Need All 3 Types of Plans for Transition and Disruption

Many advisors are overconfident about the plans they have in place, Armitage and Bruno said. Meanwhile, “one of the major stumbling blocks for advisors putting in place these plans is the confusion over them,” Armitage noted, adding: “Many folks think because they have a business continuity plan in place, they’re all set.”

However, many of them are not set because “you need all three” types of plans to deal with a disruption or transition, she said.

Those three types of plans include: Traditional business continuity planning to safeguard your clients and their accounts, and make sure they can access their funds in the event of a physical disaster or a cybersecurity breach; key executive continuity planning to determine what happens if you become disabled, sick, get hit by a bus or die, but also if you lose your license or RIA certification, or go to jail; and succession planning.

What Could Happen If You Don’t Have a Continuity Plan?

“When you don’t have a continuity plan in place … often times the flow of cash into the organization does stop right there” as soon as an unexpected event happens, Armitage said.

“Obviously not having the revenue come into the organization can have a tremendous impact  — from your employees not being paid, your clients not being able to have access to the funds that they need as well as the services they need,” she noted.

“If something happens to you and you don’t have a continuity plan put in place, often times the value of the business drops by 50% for that triggering event,” she warned.

The result is “a lot of chaos,” and it “provides tremendous hardship for those that are left to pick up the pieces,” she said.

Other Benefits of a Continuity Plan

It is a huge advantage “having the peace of mind knowing that things are put in place, and it’s important to communicate to your family members, to your team” and also your clients “to let them know if something happens to me, we have a plan in place” for somebody “to take over for me,” she said.

It can also “really increase that bond and relationship with your client, and you’re demonstrating your professionalism,” she noted, adding: “When we see organizations that have a defined and documented continuity plan, that’s usually a telltale sign of a very well-run business.”

Also, “when it comes time to sell that business, the buyers really appreciate” it too, she said.

Where You Should Start

Often, all of the information for running an advisor’s firm is in the owner’s head, Armitage noted. After all, “they’ve been doing what they do for so long and they’re so good at it, they don’t even think about it,” she said.

However, “when you stop and think about all of the hats that an entrepreneur wears, it’s pretty exhausting,” and not everything they do is so obvious. Therefore, it is important to make a detailed list of all the key functions that you perform and what you have access to, she said.

“The big takeaway here for advisors is to get it out of just your mind or your memory and to document it in an accessible place — only with certain key individuals having access to that, obviously, because you don’t want to give away your secret sauce” or any of your passwords and other confidential information, she advised.

“One of the stumbling blocks I also see advisors have with getting started is that they think it’s permanent — [so] they don’t want to make a mistake,” she told viewers. But she pointed out that the plan can always be updated — and should be, at least once a year.

The Next Steps

Next, the advisor should develop a business continuity manual for the continuity partner to have, she said, adding it should be in electronic format, so it’s accessible and searchable by keyword from anywhere and easier to regularly update.

“Finding the right continuity partner is obviously one of the most difficult components and it’s also the most important,” she went on to say. Therefore, it “requires a lot of thought and some outside perspective can be helpful.”

While it might be easy to figure out if you and another advisor share the same business and investment philosophies, it is typically more “challenging” to figure out the right match in other ways, such as whether somebody is a good person that you can trust, she said. And having someone you can trust is “one of the big showstoppers for most advisors in selecting somebody as their continuity partner,” she said.

Understanding the Laws and Rules

It is also crucial for advisors to understand all the related laws and rules when it comes to having a continuity plan, according to Max Schatzow, an attorney at the law firm Stark & Stark.

Although there is not a statute or rule by the Securities and Exchange Commission for RIAs to maintain a business continuity plan, it is widely believed to be required under SEC Rule 206(4)-7 and because of an RIA’s fiduciary obligation to clients, he said. The Financial Industry Regulatory Authority, meanwhile, has enacted rules to mandate business continuity planning, he noted.

It might be a good idea to use the coronavirus crisis as a learning experience, he said, adding: “If you decide your policies and procedures [and] your continuity plan didn’t cut it for this event, it’s definitely time to revisit them [and] revise them because there’s always time to improve your policies and procedures.”


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