What would it mean to you if time ran out?

Jul 27, 2014 @ 12:01 am

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(Roger Schillerstrom)

No one imagines they will be on the other end of a call from their doctor with a diagnosis of terminal illness. But it happens every day. And people get hit by busses everyday too.

This message isn't intended to bring unnecessary fear into the hearts of advisers, except to the degree it can act as a motivator to finally put a continuity plan in place should the unthinkable happen.

As Liz Skinner reports, financial adviser Dan Candura thought he would have more time. More time with his family, more time to fulfill his life's purpose and more time to ensure those under his professional guidance — his clients — would be taken care of.

Unfortunately, his diagnosis of prostate cancer in January put everything on the fast track.

Every person's lifetime contains an unspecified number of days — some people don't get even the limited notice Dan got. Because unexpected crises strike all the time and their targets are often unpredictable, and because clients rely on their adviser to be there for them, it is an adviser's duty to be prepared.

Whether it's sudden incapacity or death or even a natural disaster hindering business continuity, where would your clients turn if your phone calls just stopped coming one day? Who would step in to help them gain access to funds and stay on the right path to a healthy financial future?


And what about the value of the business you've built and those who might inherit that value? If you pass away long before an intended succession plan is in place, your family might be forced to negotiate what portion of the business is rightly theirs at the same time they're dealing with the emotions of suddenly losing you. And that's exactly the wrong time.

If your obligations to protect clients and provide for your family aren't reason enough, the Securities and Exchange Commission has its own expectations.

The SEC released a risk alert last August following a review of business continuity in light of the devastation Hurricane Sandy brought some advisers in the Northeast in October 2012, causing many to close their doors for a few days or even a few weeks. As well as natural disaster recovery, the alert discussed general investment adviser requirements under SEC rule 206(4)-7 of the Advisers' Act, particularly that “an adviser's fiduciary obligation to its clients includes taking steps to protect the clients' interests from risks resulting from the adviser's inability to provide advisory services.”


A footnote to the original rule on developing a business continuity plan specifically mentions its importance for smaller firms in case of “the death of the owner or key personnel.”

The good news is that setting up a continuity plan may not be as elaborate and therefore tedious as you think. We're not talking about a succession plan here, though a continuity plan can certainly help inform a more detailed and longer-transition succession plan down the road. A continuity plan basically involves finding a licensed person who can step in during your temporary or permanent departure who can act on behalf of your clients, and setting up a power of attorney.

So advisers who care about the long-term well-being of their clients, and frankly the ability of their own heirs to have a stake in the future of a business that suddenly shifts to a new adviser, is to put down this newspaper right now, find a colleague, make an agreement and tell your clients.


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