Industry statistics reveal that roughly only 16% of Advisors have an interim or emergency continuity plan in place in case of an unforeseen event (death or disability). This means that there is not an existing plan that will allow a business to continue should something happen to more than 80% of Advisors. The lack of a plan means you’re not acting as a fiduciary to your Clients under DOL rules.
Multiple options exist to fix this:
- Implement a Buy-Sell Agreement within your Firm (provisions will be included in your Operating Agreement); grant potential Next Gen the first right of refusal
- Implement a Practice Continuity Agreement with another Advisor/Firm (it can be one-way or dual)
- If you’re affiliated with an OSJ, execute an Agreement that the OSJ can purchase your book
- Set up an Advisory Board that can transition to a Board of Directors who can implement your wishes or prepare the Firm for sale should something occur
- Utilize a Business Continuity Trust if you have children in the business that maybe aren’t quite experienced enough today to step in (the Board can provide oversight until they are)