Safeguarding Your Financial Advisory Business : Ensuring Business Stability and Client Protection in Unforeseen Circumstances

A continuity plan is a crucial tool that provides your financial advisory business with a clear roadmap in the event of unforeseen circumstances. For advisors who handle their clients' finances daily, having a continuity plan in place becomes even more essential. This guide outlines fundamental steps to help you establish a robust continuity plan that safeguards your business, clients, and beneficiaries.

It's important to note that a continuity plan is a living document that should be periodically reviewed and updated as necessary. Additionally, the replacement advisor doesn't necessarily have to be your long-term successor. The plan is designed to address short-term contingencies and can be adjusted accordingly.

When identifying an advisor or firm for your continuity plan, consider their capacity to take over your clients while effectively managing their operations seamlessly. Evaluate their expertise to ensure they possess the necessary knowledge, skills, and experience to effectively serve your clients. Furthermore, assess their financial resources and capital to guarantee that your beneficiary will receive the agreed-upon value for your business in the event of an unforeseen circumstance.

Determining fair compensation for beneficiaries is an integral part of a continuity plan. The value received for a continuity agreement is typically less than the full value of a succession plan, as there is no client transition when a continuity agreement is immediately implemented. One common approach is a percentage of revenue for a certain number of years, paid monthly to the beneficiary.

Ensuring the replacement advisor can access client information is crucial when implementing a continuity plan. Document the process for transferring system access, client files, and agreements, and consult with your technology partners and firm/custodians to understand their specific methods for providing client account access.

After identifying your continuity partner, determining compensation, and outlining the client transition plan, finalize your continuity plan with a legal agreement. Include key elements such as deal terms, assets included/excluded, a severability clause, and beneficiary information.

Finally, don't forget to notify your clients about your continuity plan. This proactive communication will deepen the trust you have already established with your clients, assuring them that their financial well-being is protected in the event of unforeseen circumstances.

By following these steps and implementing a comprehensive continuity plan, you can safeguard your financial advisory business, protect your client's interests, and provide peace of mind for you and your loved ones.