TRANSITION TALK

Six Steps to Creating An Effective Continuity Plan

Posted by Marcus Hagood on May 2, 2018 12:00:00 AM

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The single, biggest threat to an independent advisory practice is not the lack of a succession or exit plan, it is the lack of a plan to protect client interests and business value in the event of an owner’s sudden death or disability. And still, relatively few practice owners have implemented a reliable continuity plan.

As you put together your own unique plan, here are six best practices to consider as you create an effective and practical continuity plan:

  1. Put your plan in writing. Create a concise, clearly-written continuity plan so that it works under adverse circumstances, without your ongoing involvement.

  2. Use an industry-specific valuation for market value in a transition to a third-party buyer or external continuity partner, or an equity-based valuation for equity ownership interests as is common with internal continuity partners. For situations like death or disability, it is important to quickly, and accurately determine value. Be sure the determined value comes from a credible, third-party opinion with the database and accreditation to support the result.

  3. Update your buy-sell agreement and valuation on an annual basis. As your business grows, you’ll want to capture current value and deal terms that support an agreed upon purchase amount. A routine review of the agreement can help practice owners ensure that their document addresses changes in circumstances and provides for evolution of the plan.

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Topics: Continuity Planning

Safeguarding Your Value Through Continuity

Posted by FP Transitions on Apr 4, 2018 1:53:08 PM

Completing a formal valuation is step one. Step two is securing that value with a continuity plan.

Having a formal, written continuity plan in place for the unexpected exit of an owner–especially if they’re the only owner–is paramount to ensure your practice and its clients are protected

Annually updating the plan is just as important as the signatures on the document itself. Your plan and contingencies must evolve along with your business. An up-to-date and accurate agreement will prevent confusion in an already emotional and chaotic situation should the plan need to be implemented. Each year you must account for any business growth (or decline) as well as changes in compensation, personnel, client base, and other practice details.

The infographic below breaks down some continuity basics and options.

Continuity Planning Basics

click to enlarge

Ensure your business is safeguarded against the unexpected. Explore FP Transitions' Continuity Planning services or call 800.934.3303 to update (or establish) your continuity plan.

Download Continuity Planning 2015

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Topics: Continuity Planning, Business Growth

SEC Proposed Rule 206(4)-4 & Proposed Amendments to Rule 204-2 Business Continuity & Transition Plans

Posted by Marcus Hagood on Oct 18, 2016 3:37:25 PM
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In past years, the slow and steady migration of independent financial service providers to the independent Registered Investment Advisory (RIA) channel has been well documented. As the number of state and SEC registered advisors continues to swell, the regulatory framework under which they have operated will undoubtedly become increasingly complicated.

For years, it has been the practice of regulators to primarily focus their attention on the largest players in our industry. Broker Dealers, Custodians, and product producers have, by and large, borne the responsibility of complying with our industry rules, if not in actual operation, then through procedural and compliance oversight of the independent producer. Call it the cost of success, but the regulatory bulls-eye is–without question–moving more and more toward the independent financial service provider. A perfect example of this is the SEC proposed Rule 206(4)-4 and amendments to Rule 204-2 for “Business Continuity and Transition Plans.”

DISASTER PREPARATION

After finding that many RIA firms were not well prepared in the aftermath of Hurricanes Katrina and Sandy, the SEC released alerts that practice owners should more closely review their disaster preparedness and continuity plans. Many of the new requirements under the proposed rules were to address shortfalls that were identified by these events in actual practice. Unfortunately, that guidance appears to be ignored by many whether through frustration, inability, or otherwise. Add to this, as FP Transitions has often pointed out, the substantial lack of Continuity Planning (death or disability planning) in our aging industry, and you have a perfect storm for regulatory intervention.

The Proposed SEC Rule 206(4)-4 and the amendments to Rule 204-2 are stepping in to address these apparent short falls in preparedness. Although many of these new regulations are considered within requirements that have long been in place for Business Continuity and Disaster Recovery under SEC Rule 38-1a and FINRA rule 4370, there are significant new requirements that are part of the language in the proposed rules and rule changes. Some of the highlights include:

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Topics: Continuity Planning, Transition Plan, SEC, Securities & Exchange Commission

Continuity Partner Matching

Posted by FP Transitions on Jul 20, 2016 8:14:25 AM

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Last week we had a client tell us that since he had implemented a formal continuity plan, his clients have felt more comfortable adding assets to their portfolios now that their tenure with his business is protected. The stability of continuity is an important cornerstone for continued business growth and client retention.

Currently, FINRA requires that member firms have a Business Continuity Plan (BCP) that is written and can be made available upon request. More recently, the SEC has proposed a rule which would make it unlawful to provide advisory services to clients unless the RIA has a written business continuity and transition plan in place.

FP Transitions has been helping financial advisors document, implement, and annually update their formal continuity plans for over a decade. Now we are able to leverage our extensive network of advisors to help connect you to the right continuity partner for your unique business.

Single owner practices without writtenactionable continuity plans and identified continuity partners, are at a disadvantage to larger businesses and firms with built-in succession plans.

As the owner and person that has built a trusting relationship with your clients, you know that it is crucial to protect their wealth as well as your business as a whole. The most challenging aspect of developing a continuity plan, however, is finding the right partner. Of course you want to be discerning when it comes to the person who is going to care for the business you’ve built when you no longer can.

Introducing Continuity Partner Matching!

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Topics: Continuity Planning, FP Transitions, Continuity Partner Matching

FREE Continuity White Paper

Posted by FP Transitions on Aug 11, 2015 9:30:00 AM

The single, biggest threat to a financial services business with one owner, or only one primary advisory, is not the lack of a succession plan. It is, in fact, the lack of a plan to protect the clients and the practice's value in the event of an owner's sudden death or disability.

Our FREE white paper, published earlier this year, compiles almost two decades of knowledge when it comes to continuity planning for financial professionals.

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Topics: Continuity Planning

Decrypting Continuity [INFOGRAPHIC]

Posted by FP Transitions on May 5, 2015 1:06:00 PM

There is a lot to consider when crafting an effective continuity plan: partner, terms, triggering events, and clients expectations to name a few. This infographic below breaks down the most important elements of continuity planning to help tackling the process a little simpler.

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Topics: Continuity Planning, Infographic

How to Jump to the Top of the Buyer List

Posted by FP Transitions on Apr 8, 2015 10:00:00 AM

If 95% of financial advisory practices have only one owner then most are–or should be–looking outside their own advisory for a continuity partner. You should be that partner, especially if your long-term growth strategies include acquisition.

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Topics: Continuity Planning, Acquisition

Continuity Challenge #1: Finding a Partner

Posted by FP Transitions on Mar 30, 2015 10:41:09 AM

The single, biggest threat to the continuity of an independent financial services or advisory practice is the lack of formal plan to protect the clients, cash flow, and value in the event of the sudden death or disability of the primary advisor. And the biggest challenge to obtaining protection is finding a great continuity partner.

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Topics: Continuity Planning

Securing Value for Your Future

Posted by FP Transitions on Feb 19, 2015 8:00:00 AM

It’s not just a financial advisor mentality; it’s a human mentality. We KNOW life is finite, but we don’t want to think about our mortality, and we certainly don’t want to plan for it. But, as an advisor, isn’t that one of your big pitches? Invest now, plan wisely, and grow wealth for the future. Provide for your heirs when you’re gone. You encourage every one of your clients to not only plan for their future, but to prepare for what comes after. That’s good advice.

 Download Continuity Planning 2015

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Topics: Continuity Planning

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