Does Your Continuity Plan Pass the Test?

At Pinnacle Advisor Finance, we work with financial advisors through some of the most significant transitions of their careers. One thing we see consistently, and it surprises many advisors, is how few have a legitimate continuity plan in place when it matters most.

The numbers tell a striking story. Less than a third of advisors have a continuity plan, and yet nearly 40% of advisors are expected to retire within the next decade, with those advisors controlling an estimated $10.4 trillion in assets. The gap between what’s at stake and the lack of preparation is remarkable.

What’s Actually at Stake

Your practice is likely your largest financial asset. A practice generating $500,000 in revenue could be worth $1.25 million or more. Without a continuity plan, a death or disability event can cost your estate 50% or more of that value. Staff leave because they don’t know what’s happening. Clients attrite without a clear answer about who will manage their money. And buyers discount heavily knowing they have the upper hand.

What a Real Plan Looks Like

Not all continuity plans are created equal. Filling out a form with your broker dealer is not a plan. It may redirect your clients to another advisor, but it does nothing to protect the value of your asset or provide for your family.

A legitimate continuity plan has three components:

A written agreement drafted by an attorney. Templates are a starting point at best. They intentionally omit the deal terms including payment structure, timing, and valuation methodology, because those details need to be specific to your situation. That’s exactly what your family will need if something happens to you.

A communication strategy. Your clients, team, and family should know the plan exists. Advisors who communicate this consistently find that clients refer more freely, bring in more assets, and are far easier to transition when retirement comes.

Accessible documentation. When a triggering event occurs, time works against you. Your designated point people need to immediately find everything including agreements, contacts, passwords, and employment documents. A secure shared folder costs little and takes minutes to set up.

Four Questions Worth Answering Today

If the answer to any of these is no, your plan is not complete, even if you have taken some steps:

1.    Do you know exactly what would happen to your practice in the event of your disability, backed by a legal document?

2.    Have you identified point people internally, within your estate, and at your continuity partner’s firm?

3.    Do your family, staff, and clients know the plan?

4.    Could your point people find all relevant documents right now, without your help?

The Bottom Line

As an advisor who spends their career teaching people how to plan and prepare for the unexpected, you too must plan for the unexpected to happen to you and your practice. We encounter the consequences of missing or inadequate continuity plans during the lending process more often than we’d like. The good news is that getting one in place is far simpler than most advisors expect. You help clients protect their financial futures every day. Make sure yours is protected too.

Please reach out to Pinnacle Advisor Finance for your financing needs. Whether you are succession planning, buying a book of business, in need of working capital or desire to refinance existing debt, Pinnacle Advisor Finance provides commercial business loans at attractive rates to assist you in growing your business.