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Continuity Planning – The Questions Financial Advisors Need to Answer + Checklist Download

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There is a critical gap with financial advisors understanding the difference between continuity, contingency, and succession plans. Most advisors tend to fuse them together and miss the value a continuity plan provides.

In the case of a tragic event, failing to plan may be planning to fail. As a financial advisor, you need to ask yourself a series of “what if” and “what will happen” questions:

  • What if I can’t return to work tomorrow – either temporarily or permanently?
  • What will happen to my clients?
  • What will happen to my team?
  • What if my business isn’t marketable?
     

Most advisors have these questions scattered in the back of their mind and know it is important, but often a formal plan is put on the back burner. If you don’t answer these questions, who will be there to answer them for you? Will it be a grieving spouse or family member, team members, your clients?

The Difference Between Continuity, Contingency, and Succession Planning

All financial advisors should have continuity, contingency, and succession plans in place.

  • continuity plan is a process that can be implemented immediately due to any unexpected disruption in your ability to work – either temporarily or permanently.
  • contingency plan is a process that will be implemented due to a disaster; a tornado, hurricane, flood, or fire. Keep in mind, you, the advisor, are present and able to lead the team and answer client questions.
  • succession plan is a process that will take place over a period of time prior to a planned exit from your firm, such as your retirement.
     

How Continuity Plans Protect the Value of Your Firm

Continuity planning plays a valuable part in protecting the value of your firm. Ask yourself these questions:

  • How likely is it to retain skilled team members if they are unsure what will happen to their position should something happen to you?
  • How likely is it to retain current assets, capture new assets, and referrals if clients are uneasy about your likely retirement?
     

Studies show that clients are likely to choose a new advisor and are hesitant to provide referrals as they see their advisor nearing retirement or becoming disabled. Retain your clients and firm value by communicating your continuity plan. When clients have a clear understanding of who will manage their portfolio and answer their questions, they feel reassured that they will be cared for in the event of your unexpected absence.

Make it Simple and Put a Plan in Place

A continuity plan should be part of your overall business plan. A study conducted by Pershing, ReGENeration: How Gen Y Could Revitalize the Industry – and Bring New Life to Your Firm, tells us that it takes an average of 11 years for your associate advisor or next person in line to be up and running as efficiently as you are. The readiness gap is too large. As an advisor, you need to ensure proper training is put in place to close the gap or position a continuity partner that has the ability to step in now.

Here are a few tips to put your plan in place:

  • Name a Continuity Partner: Choose an advisor that is compatible with your firm and has the ability to step in at a moment’s notice.
  • Include a Time Frame: Determine the duration of your continuity plan depending on the circumstance.
  • Inform Your Broker/Dealer: Provide guidance to your broker/dealer with a copy of your continuity plan.
  • Inform Family, Team Members, and Clients: Communicate the process with your family, team members, and clients. 
  • Address Your Succession Plan: Review your succession plan with your continuity partner and other key personnel.
     

As a financial advisor, you have the responsibility to provide direction to your family, team, and clients. Take time to prepare yourself in order to make necessary and rational decisions.

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