Continuity Planning for the Investment Professional

Continuity PlanningEstablishing a practical plan to protect against an advisor’s sudden death or disability is one of the most important and challenging aspects of being an independent business owner. The vast majority of financial service practices are largely dependent on the skills and talents of one primary advisor, leaving the business, staff, clients and the advisor’s family vulnerable should the owner have a catastrophic injury or illness. This problem isn’t restricted to just sole-practitioners, however; multi-owner businesses which tend to operate as separate or individual silos are equally vulnerable. A heart attack, car accident or a stroke can erase years of built-up equity value and the clients’ trust in a few seconds.

A continuity plan is an emergency plan that assures transfer of control (sometimes temporarily) and provides protection of value in the event of the sudden death or disability of an advisor. For many advisors, the goal of continuity planning is focused more, in a monetary sense, on protecting the compensation elements of the practice (i.e., an advisor’s earnings) rather than the equity value of the practice itself. In fact, a practical and fully integrated continuity plan can and must easily do both; otherwise it risks losing hundreds of thousands and perhaps millions of dollars of value built over the course of an advisor’s career.

In the investment advisory profession, lack of continuity planning has become an industry-wide problem due to the aging advisor population and the predominant sole practitioner business models they operate within. A recent 10 year study by FP Transitions found that less than 3% of independent advisors have a written continuity plan to protect against an advisor’s death or disability.

Every independent business owner should take the time to create a written continuity plan in case of sudden death or disability. Continuity planning, when integrated into an overall practice management and succession planning strategy, can be one of the most powerful business planning tools an advisor can implement.

In sum, Investment professionals have a duty and responsibility to their families, staff and clients to have a formal plan that addresses their personal retirement objectives as well as life’s what ifs.

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