A Continuity Plan Benefits Everyone

Journal of Financial Planning: October 2021


Kristine McManus is vice president, chief business development officer at Commonwealth Financial Network, member FINRA/SIPC.

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“What would we ever do without you?” That’s something clients frequently say to their adviser in gratitude for the financial planning, retirement preparation, and investments the adviser manages for them. Most clients place a great deal of trust in their adviser and rely on them to take care of their family and future generations when they’re no longer able to do so. Yet there’s something in those words of praise that advisers should also hear: a warning.

If something unexpected happens to you, who would take care of your clients? It’s not a rhetorical question. Here at Commonwealth, we’ve seen a lot of bad things happen to good advisers: an adviser who was hit by a bus and was in the hospital for months; sudden illness and heart attacks; and wildfires that consumed an adviser’s office and forced her to evacuate. Try as we might, there are things we can’t control. You don’t get to choose when something unexpected happens to you—but you can choose to be prepared.

Planning for the Unexpected

This choice brings us to the subject of continuity planning. According to research by FP Transitions, fewer than one-third of advisers have continuity plans, despite the average age of independent advisers in North America being 59. That means roughly 66 percent of clients would not know who to turn to if something happened to their adviser. That’s a huge miss, and it could also be a costly one.

In most cases, advisory fee revenues must cease immediately until a new adviser is named because of regulations governing an adviser’s fiduciary duties to clients. (Without an adviser on record, client advisory accounts often move to brokerage ones, fees will be forgiven, and accounts would need to be repapered if there was a fee reinstatement.) So, if you got hit by a bus without warning (and it’s always without warning, isn’t it?) and were in the hospital for a few weeks, your business would not receive any fee income. What would that do to your family during a crisis?

Continuity planning is something separate and discrete from having a succession plan. While in some cases a continuity partner might also be the successor in a practice, the partnerships are created to cover very different things. Continuity planning gives instructions as to how your practice will continue to run in the event of your disability, death, or another unplanned event; the key word here is unplanned. In these emergencies, having a continuity plan in place saves valuable time and effort.

Take Actionable Steps

What advice would you give your business-owner clients if they came to you in a similar situation? You’d tell them to make continuity planning their number one priority—so, take your own good advice.

  1. Don’t wait. If you start the process, you have a much better chance of completing it, so ask your partner firm today for a continuity agreement. They should have sample ones on file, and you might be surprised at how easy this document is to complete.
  2. Identify a continuity partner. This is often the biggest hurdle for advisers. If you work in a firm with multiple advisers, it should be easy; and if you’re a solo adviser, you are probably friendly with another great adviser. Ask them if they’d be willing to serve as your continuity partner and offer to do the same for them. They don’t need to live in your same geographic vicinity, so long as they can offer advice and guidance. (Think Zoom and telephone reviews.)
  3. Send the completed agreement to your firm’s back office. A signed agreement won’t do any good if your partner firm doesn’t have it on file (like a beneficiary form). Be sure to mail or digitally send the continuity agreement to your firm and confirm they have received and approved it.

Prepare and Protect Your Clients

If you serve as a fiduciary for your clients, either as a fee-only adviser or for an advisory business, you should also consider whether not having a continuity plan is a breach of your fiduciary duty to clients. The trust and goodwill you might lose from your clients if something happened to you would be hard to regain. Put a continuity plan in place, so you can feel assured that you’ve better protected your clients, your family, and your staff. 

Practice Management