Between guiding clients through the current surge in market volatility, shifting to a work-from-home model and preparing to meet the looming Reg BI implementation deadline, it’s no exaggeration to say that this may be the most challenging time you’ve ever faced as an advisor.
It’s no surprise, therefore, that double-checking and firming up your continuity plan is something you may have allowed to fall by the wayside — even as there is an increased likelihood that businesses across the industry could suffer a disruption.
Pressed for time, some of you may hope your existing plan is adequate, while believing you’ll make the necessary updates when the current situation settles down a bit.
However, this issue is too important to let slide. Here are some simple continuity best practices to act on immediately:
1. Run an inventory of your documents.
Keep in mind, these forms aren’t just an outline of your plan — they are also a mechanism to compel members of your team and key third parties to carry out their responsibilities to keep the business running.
Without these documents in place, not only are clients at risk of losing access to financial guidance, but your beneficiaries, family members and employees could suffer severe consequences as well.
It’s best to go with a basic, easy-to-follow plan that clearly outlines expectations. The last thing you want in an emergency is an extra layer of complexity.
Above all, keep a signed copy in an easily accessible location and make sure your broker-dealer also has one for back up.
2. Keep key details in mind.
Every plan needs to address certain key elements, including taxes, term and structure.
Continuity plans should be structured differently than full succession plans, where an advisor and successor presumably have a longer runway to choreograph a smooth transition.
In a continuity scenario, the emphasis must be on speed of implementation, and the terms and structure of the agreement must reflect this.
Additionally, you should check to ensure your continuity plan addresses both permanent and temporary disability. Doing so will provide you and your employees with the flexibility to react to a broader range of disruption scenarios to protect the practice and your clients.
3. Make an actionable plan free of common errors, roadblocks.
A continuity plan needs to be easy to implement, include clear roles and responsibilities for each team member, and convey a step-by-step process for executing leadership changes, whether they are temporary or permanent.
Unfortunately, avoidable stumbling blocks can often emerge at the worst time, making otherwise solid plans unusable.
One area where we commonly see unforced errors is in licensing. For instance, if an advisor has their Series 7 license, but their designated continuity partner does not, the latter will not be able to serve many of the clients they inherit temporarily, which means everyone will have to surrender revenue.
The same applies to an advisor with a Series 65 but not a Series 66.
4. Lean on Your BD
During this pandemic, it’s likely you are working hard to reassure your clients and keep their financial plans on track.
But for the sake of the business, you must be able to rely on your broker-dealer to offer the same level of support with your continuity plan.
Indeed, lean on them to highlight critical “spot checks” you can make to ensure that your practice can continue to operate smoothly if something unexpected happens to you or one of your partners.
Equally important, they should be able to determine the durability of your plan, helping you to figure out whether it will cover more than just a short-term disaster.
In lending a hand with this type of legwork now, they can ensure your practice is prepared not only for the current coronavirus pandemic, but also for a wide range of potential challenges in the future.
Todd Fulks, JD, is Advisor Group’s Senior Vice President for Succession Planning & Business Acquisition.