Continuity Planning for Advisors: Resolutions for the New Year

New Year’s resolutions menace me. I like the idea of them—using the promise of a new year to make a vow to improve some part of my life—but their execution is fraught with frustration. In working with advisors, I hear a lot of this same frustration. Most resolutions are associated with the things that “should be” done but, somehow, remain undone. Succession and continuity planning is high up on this list for many advisors.

But continuity planning doesn't have to be another unsuccessful resolution. Learn what it entails, why it's so important for your practice, and how to establish a successful plan (this year)!

Succession planning is the long-term, controlled transition of your firm to another owner-advisor. It may mark the kick-off to your retirement. Just as likely, it may signal the start of your continued involvement in your firm but with more time and energy focused on a particular client segment. Or, maybe it will begin a transition to a work schedule that requires a smaller time commitment.

Continuity planning for advisors, on the other hand, makes provision for the continued running of your practice in the event that you pass away or become disabled—an in-the-moment, unexpected transition that usually does not involve you. When you experience an unexpected event, it is a time of high emotion, disruption, and uncertainty. A continuity plan strives to minimize this uncertainty, provide a smooth transition, and allow for high client retention. All advisors need a continuity plan, regardless of how long they plan to remain active in their firm.

Perhaps you’re asking yourself, "Is coming up with a continuity plan really so important?" To find out, try this exercise. One day this quarter, when no client appointments are scheduled, don’t show up at the office. Call in and tell your staff that you are calling a continuity drill. Your team’s job for the next couple of hours is to figure out how they would respond if this were a real event, without the benefit of any input from you.

• What happens?
• What questions does your staff have?
• What critical processes would your staff attend to first?
• Whom would your staff contact to tell them of your situation?

Ask your staff to meet and write down the steps they would take if the situation were real. Be sure to ask them to document how they would communicate the news to clients, your broker/dealer, and neighboring businesses (if applicable). When you return to the office, review the drill and commit to putting a plan in place to ensure that a future drill goes more smoothly. You’ll likely see the need for a number of critical documents, including a continuity plan.

Even if you perform this drill, you might find you’re still resistant to putting this type of agreement together. If so, you’re definitely not alone. For some, the contemplation (however short-lived) of their mortality stops them in their tracks. For others, the elusive search for a perfect partner gets in the way of an ideal partner candidate right next door. Still others see the completion of continuity agreements as a ceding of control, when, in fact, the point of a continuity agreement is to ensure that you remain in control over what happens to the business and relationships you have built! Once a plan is in place, though, you’ve only begun the process. There is a lot to do on a continual basis to ensure that your plan has staying power.

In the spirit of the season, these five resolutions will set you on the path to an effective continuity plan.

1) Establish an agreement with your chosen partner (by March 31, 2016). You may have a candidate right under your roof with whom you’d like to partner, or you may need to work with someone outside of your firm. Either way, document your agreement so that your intentions are clear.

• Your broker/dealer may be able to introduce you to advisors in your area or advisors with practices similar to yours who may be a good fit.
• Your home office may have a sample agreement to help you get started.

2) Communicate the plan to your staff (by June 30, 2016). Your staff needs to be informed of the continuity plan basics:

• Critical contacts for them to make if something happens to you
• Essential processes to prioritize
• Where they can go for help
• Expectations for their transition to the new advisor, including how they will get paid in the meantime

Also, be sure to document all of the above and put it in an easily accessible place.

3) Inform your clients about your plan (by September 30, 2016). All of your clients (particularly your top clients) should be informed about your plan, so they know you have made provisions for the servicing of their accounts. Information that you might want to share with them includes:

• The name of your continuity partner and his or her contact information (e.g., web address)
• From whom they can expect to hear if something happens to you
• Your plan for ensuring that nothing falls through the cracks if you are no longer able to work

Of course, your continuity partner should be part of any communication sent to your clients in the event of a transition.

4) Assess your practice (by December 31, 2016). The goal of this assessment is to identify areas that can be improved upon and increase the likelihood of a seamless transition, if needed. To help guide this process, ask yourself the following questions:

• Are all of your business documents up to date and readily accessible? This includes, but is not limited to, a business plan, marketing plan, disaster recovery (FINRA has a sample plan to get you started), employee handbook, job descriptions, and financial statements.
• Are operations as streamlined as possible? Here, a checklist of key activities and documentation of procedures will be essential. You’ll want to ensure that technology support exists for processes, job responsibilities are clearly understood, staff members are cross-trained, and there is regular communications between operations staff. Finally, be sure your client categories are defined and a tiered service matrix of client deliverables has been established.
• Is your investment strategy clearly understood? To help answer this question, define models, if appropriate, as well as allocation strategies.

5) Commit to meeting regularly (e.g., once annually) with your continuity partner. Regular meetings will ensure that the arrangement continues to make sense for you, your partner, and your firms.

Continuity planning does not need to be one of those resolutions that is put off year after year. Make 2016 the year that you get it done, and free yourself to focus on growing the practice you have so thoughtfully built.

Do you have a continuity plan in place? How did you go about finding a partner? Please share your thoughts with us below.