Ongoing developments with COVID-19 have prompted a number of advisors to contact us and make sure their death and disability continuity plans are up to date. It’s worth noting that only about 30% of advisors have any type of formal, written death and disability agreement in place. That leaves 70% with little to no protection for their business and clients.
What is Continuity Planning?
Business Continuity Planning is required by most regulatory organizations in the financial services industry. The common objective is preserving client service and asset management continuity in the event of natural disaster, national emergency, or exit of the licensed principal. Death or disability agreements provide a contingency plan that ensures a seamless transfer of control and responsibility for the business in the event of an owner’s unplanned and abrupt departure.
In the wake of COVID-19, we’ve seen many of these operational contingencies enacted by advisory firms nationwide, and that the preparation for a sudden exit is equally as crucial. Highly transmittable and difficult to predict respiratory viruses aside, you never know when an unexpected event will prevent you from performing your role as owner and advisor.
There are a variety of different types of continuity plans depending on your needs and capabilities. Enterprises with internal succession plans enjoy built in continuity and other businesses create formal plans like Buy/Sell or Guardian Agreements with trusted colleagues outside their practice. Another continuity option is a Practice Emergency Plan, which does not require a defined continuity partner.
No Partner? No Problem.
When it comes to creating continuity and protecting the business, one question we get often is: What if I don’t have a continuity partner with whom to create a death or disability agreement?
This is, unfortunately, a common problem. But why?
Many financial services businesses are built around the skill sets of a single advisor, which can make identifying a continuity partner tough. Whether this is due to the time it takes to network and form professional relationships, location, or unique investment philosophies, many advisors struggle to find the right partner who might potentially take on their clients.
While finding a continuity partner who is a perfect fit should remain the ultimate goal, it’s important to have a “right now” plan in place until you do identify a partner and create a more formal agreement.
The Practice Emergency Plan (PEP) is a perfect solution for advisors who do not currently have a continuity partner. At the time of a death or disability triggering event, the plan leverages the FP Transitions’ network of financial professionals and pairs it with our M&A expertise to find a buyer that aligns with your clients and the business you’ve built. This system maximizes the value of your business by listing and selling it on the open market in a death or disability event. Our team will help facilitate the process from start to finish, from listing to selecting offer to drafting contracts and closing the sale. Proceeds then go to your predetermined beneficiary or your estate.
While the PEP is ideal for advisors who don’t have a continuity partner, it can also play an important role for those that do. Many of our advisors fortify an existing continuity plan with a PEP as a safety net. The PEP never expires yet is superseded by any current formal continuity agreement. It provides protection in case your formal plan has lapsed or while you take the time to find the right partner and solidify the agreement documents.
Practice Emergency Plans (PEPs) along with more formal continuity planning support are included with our Equity Management System (EMS) memberships. EMS members also have access to our Continuity Partner Matching Program which casts a broader net to tap into our extensive membership base to find the right continuity partner. Our experts then draft formal documentation that ensure your plan is in place before any triggering events may occur.