Protect your business
The second step in creating a succession plan is protecting the current value of your business with a continuity plan. A continuity plan ensures your clients will continue to be served and provides your beneficiary value for the business that you have built in the event of an untimely death or permanent disability.
There are 5 keys steps in creating and implementing a continuity plan:
+ 1) Identify a successor
What seems like the easiest step back can sometimes be the most difficult and hold advisors back from moving forward with a continuity plan. When evaluating potential successors, you want to look at a couple of factors:
- Expertise
- Capacity
- Business model
+ 2) Determine transition process for clients/business
Once you have determined who your successor is, it's important to document the transition plan, should it need to be implemented. The following details should be agreed upon and documented to ensure a smooth transition:
- Access and transfer of system access
- Client files and notes
- Client Agreements and Client Accounts
What information can be transferred and how accounts can be transitioned will depend on your firm privacy agreements, client agreements, and regulatory requirements. You should also consult with your tech partners, TAMPs, and custodians for guidance on what would be needed to transfer in the event of death of disability.
+ 3) Determine compensation to beneficiary
In the event of death or disability, the purchase of the business can be funded a number of different ways:
- % of revenue
- Fixed amount
- Insurance
The method that you choose is generally dependent on the relationship between the buyer and seller and the risk of client attrition.
+4) Put agreement in place
Once you have determined the successor, documented how the business/clients will transition, determined the purchase price, it’s time to finalize the agreement. In addition to the items outlined above the agreement should include:
- Name and contact information for all parties involved in the agreement, including beneficiary
- Assets being included or excluded other than the client accounts and compensation (i.e. – physical assets, business trade name, etc.)
- Severability clause
+5) Notify clients and partners
All the work has been completed, you have protected your clients, business, and family. However, a step that many advisors overlook is notifying their clients about the agreement. This serves a number of purposes:
- Shows clients you are putting their best interests first and making sure they will also have the service they deserve
- Will help limit client attrition if they are aware of what would happen
- Can act as a way for a client to give their authorization should that be needed in the case of a transition between two firms
After protecting your business, the next step is
Maximizing your value
Interested in learning more about how to protect your busines with a continuity plan, visit our consultative services or book your complimentary consultation.
Click the button below to download “The Reasons You Should Have a Continuity Plan”.
