Continuity and Succession Planning

October 02, 2024

By: Nicola Sutton


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. Or, reach out to us to learn more about how Beacon can support you.

* 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. 

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