Why every advisor and practice needs an emergency plan

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Clients depend on their financial advisors to help plan their retirement, create a solid investment portfolio and execute financial plans. But what happens if an advisor is hit by a bus? Will their clients be left in limbo?

Whether you want to call it an emergency plan, catastrophy plan or business continuity plan, all advisors should have one, says Roland Chan, founder and chief executive officer at Find Bob Ltd., a Toronto company providing transition management software for the financial services industry.

Unlike a succession plan that’s about transitioning leadership and ownership of a financial advisory practice, a documented emergency plan comes into play if an advisor suddenly can’t work or help clients. Think a sudden illness, accident, death, becoming an emergency caregiver, or being caught up in a natural disaster.

“Business continuity is really like an insurance plan for your business,” Mr. Chan explains. “It’s not just to protect the value of your life’s work and staff, but we have this obligation to clients.”

Nancy Allan also says that planning for the unexpected should be top of mind for every advisor. While the executive director and chief executive officer of Independent Financial Brokers of Canada (IFB) in Mississauga says she’s noticed more attention being paid to emergency plans in the past few years – starting with her association’s focus – advisors’ uptake is still woefully inadequate.

“We really see it as a public policy issue,” she says, noting she would like to see regulators step in to make an official recommendation, even if they can’t make emergency plans a requirement. Perhaps then, advisors would take planning more seriously.

“We’ve all seen the heartbreaking stories. We’ve had members die suddenly and their families are left to sort out their client files and figure out what to do.”

Clients ask about contingency plans

Leaving staff and family in the lurch isn’t the only downside not having a place in place. Clients, particularly the coveted high-net-worth and ultra-high-net-worth families, are asking their advisors increasingly whether they’re prepared for the unthinkable.

Marvin Schmidt, founder and principal of the Schmidt Investment Group at CIBC Wood Gundy, a multi-family office in Edmonton, was recently at a three-day corporate planning retreat where emergency planning was on the agenda. He says, in some ways, the family office model makes contingency planning easier as it requires multiple experts working closely together with a smaller number of clients.

Still, savvy clients often ask about contingency plans and want to know details. That’s not surprising when so much of their wealth is on the line.

“It’s a question that comes up in every new client relationship in the first three or four meetings. We have to address it,” he says.

Matthew Roncadin, general partner at Edward Jones, branch region development and performance in Goodwood, Ont., had a conversation not long ago with a veteran advisor who drove the point home for him.

The colleague recounted a story in which a wealthy, long-term client family needed help with a life event and turned to the advisor to get through it. A couple of weeks later, they wanted to set up a meeting to discuss a related matter.

“The clients said, ‘Look, we have a problem. Our biggest risk now is if something happens to you,’” he says.

While no one wants to face their own mortality – or, at the very least, worry about a flood or wildfires taking out the office – there’s good news. Putting an emergency plan in place is much easier and quicker than drafting a formalized succession plan. Think days instead of weeks or months. Put simply, an emergency plan outlines who needs to do what in case of an emergency.

How technology can help

There are software options to help get the job done. While larger firms may have internal software, IFB offers a program called Coming Up Next that Mr. Chan’s company created.

Launched six years ago, the platform is free to members and allows them to use it as a networking, marketplace and valuation tool to entice other advisors to step in and quickly take the reins if needed. There’s also the option to nominate internal and external talent who will take over in an emergency.

Another platform, TrueContinuity by Envestnet enables users to fill an online vault for key emergency contacts. If there’s an untimely death or disability, staff or family members can open the vault and find contact information for employees, clients, vendors, broker/dealers, beneficiaries and others who should be contacted. The vault also contains access to critical accounts with a link to secured passwords, any buy/sell agreements, non-competes and bonus plan information.

While it’s not imperative to use special software to create a plan, it is important to at least write it down and share it with those who need to see it. Some questions worth considering include will one person be designated to act as a successor or will the job be broken up? How will any pressing news be communicated to clients and employees? Word travels fast, so writing and storing a “bad news” e-mail or letter in advance can also help.

For Mr. Chan, business continuity plans are not simply a means to wind down a business, but a way to grow it. That’s especially true for independents who don’t have an internal successor to step in. Reaching out to other advisors in the same boat and coming up with a plan to help each other out if the worst happens can actually lead to tighter networks and new business opportunities.

“Teaming is the number one way to create future growth,” he says. “We know the vast number of advisors don’t have a plan, so this is a good opportunity to network.”

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