Wall Street got off to a slow start to begin the second quarter of 2024. Stocks lagged for much of April, rebounded in May, and were choppy in June. Investors spent the quarter watching economic data, trying to gauge whether the Federal Reserve might lower interest rates. In April, investors were discouraged by the unexpected rise in inflation, which dampened hopes of several interest rate decreases during the year. However, the latest economic data gave some indication that inflationary pressures may be scaling back. The personal consumption expenditures (PCE) price index for May rose at its slowest pace since March 2021. Nevertheless, lowering price pressures has been a slow process and inflation could push higher again. In response, the Federal Reserve has remained cautious in its assessment of inflation going forward and will look for more concrete data confirming downward price pressures before loosening its restrictive monetary policy. Several indexes reached new records throughout the quarter. The S&P 500 and the Nasdaq closed out the quarter at new highs, marking the 32nd record close of the year for the S&P 500 and the 21st for the Nasdaq. Among the market sectors, information technology outperformed, gaining 14.5% in the quarter, followed by communication services, and utilities. Materials, industrials, and real estate lagged. Rising bond yields weighed on prices, with the yield on 10-year Treasuries closing the quarter up nearly 15.0 basis points from the end of the first quarter, while the yield on the 2-year note ended the quarter about where it began. Corporate earnings got off to a good start for the year, with first-quarter earnings exceeding analyst expectations for the fifth consecutive quarter. Roughly 78.3% of S&P 500 companies reported earnings that beat expectations, as companies in consumer staples, financials, health care, real estate, and communication services bested their prior four-quarter average.

Continuity and Succession Planning – Different but Equally Vital

Have you ever received a question from a client about what would happen if something happened to you? Industry statistics suggest you did not have an answer.

Industry studies have revealed that many financial advisors lack formal continuity and succession plans. For example, a survey conducted by Investment News in 2020 found that only 27% of financial advisory firms had a formal continuity plan. *
Succession plans were similar, with Cerulli (2022) finding that only 37% of financial advisors had a formal plan. **

This article explores the critical need for a firm to have plans for both continuity and succession and provides actionable steps to implement an effective continuity plan. It also discusses how your continuity plan could lead to finding a successor.

Defining Continuity and Succession
Continuity Planning refers to the strategies and actions taken to ensure that business operations can continue smoothly in the event of unexpected disruptions, such as sudden illness, incapacity, or death of a key advisor. It is about maintaining service delivery and client trust without interruption.

Succession Planning, on the other hand, involves preparing for the future transfer of ownership and leadership of the business, typically through retirement or planned departure. Types of succession plans include internal promotion and buyout, mergers or acquisitions, family succession, or external recruitment.

Steps to a Successful Continuity Plan
1. Identify Key Roles and Functions: Identify all critical roles within your practice. Understand the specific functions that must continue to maintain client service and business operations.
2. Develop a Contingency Team: Establish a team or identify individuals who can step in during an emergency. This team should be well-versed in the critical aspects of your business and capable of maintaining operations.
3. Create Detailed Processes: Document all essential business processes and client management practices. Ensure that these procedures are accessible and understandable to those needing to follow them.
4. Communication Plan: Establish a clear communication strategy to inform clients, staff, and other stakeholders (broker-dealer, investment firms, etc.) about the continuity plan. Transparency is key to maintaining trust and minimizing confusion during disruptions.
5. Regular Training and Drills: Regularly train your staff and contingency team on the continuity plan. Conduct periodic drills to ensure everyone is prepared and can execute the plan efficiently.
6. Review and Update: Continuously review and update your continuity plan to address any changes in business operations, personnel, or client needs.

How can continuity planning help with succession?
As you go through the continuity planning process, consider how it could lead to finding a successor. For example, as you undertake steps one and two above, you may identify potential firm successors with the necessary skills, experience, and qualifications to step into a leadership role.

Or you may want to invest in training and development programs so team members are prepared to step into an advisor role either temporarily or permanently should the worst happen. In this case, financial considerations, such as key-man insurance, should also be discussed.

Finally, consider reaching out to your broker-dealer, investment management partners, or other advisors in a branch office or geographic area with clear criteria for selecting a continuity partner and potential successor, considering factors such as qualifications, experience, cultural fit, and leadership potential.

Additional Resources Available
An effective continuity plan is essential for any firm who wants to maintain service delivery to clients during times of crisis.
If you would like additional material to help build out your continuity plan, contact your Beacon representative now.

* Source: InvestmentNews, “2020 InvestmentNews Advisor Benchmarking Study”
** Source: Cerulli Associates, “U.S. Advisor Metrics 2022

Sammons Financial® is the marketing name for Sammons® Financial Group, Inc.’s member companies, including Beacon Capital Management^SM.

Beacon Capital Management, Inc. is a registered investment adviser. Information presented herein is for educational purposes only.  Beacon Capital Management does not provide tax advice, and strongly urges that retail investors consult with their tax professionals regarding any potential investment.

This is for Advisors only; it is not to be shared with Retail Investors.
BCM1495 – 052025

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