Fidelity executive: Develop a backup plan

Most advisers don't have a succession plan. But they can take the first step toward creating one by developing an emergency backup plan in case of death or disability, said officials at Fidelity Institutional Wealth Services. “We're getting calls from Fidelity clients whose advisers passed away, and they can't talk to anyone,” Waldemar Kohl, vice president at Fidelity Institutional Wealth Services, said in an interview last month at a conference for Fidelity-affiliated registered investment advisers. “It's a big issue,” he said. Mr. Kohl said about three-quarters of Fidelity RIAs do not have a succession plan. During a conference session, he said that, as a first step, advisers should find another like-minded professional who could work with their clients in an emergency. He then laid out three basic transition options: an internal transition, a merge-and-stay-involved track and a sell-and-move-on track.

"GETS THEM THINKING'

RIAs will need a temporary power of attorney so that another adviser can take over and a buy/sell agreement with someone outside the practice, Mr. Kohl said. “A buy/sell is a gateway to a full succession strategy,” said Jylanne Dunne, a senior vice president of practice management at Fidelity. “It gets them thinking about it.” Most advisers see themselves as buyers of other firms, “but when they really think about it, they're thinking about mergers,” Mr. Kohl said. The advisory industry has a clear need to address the succession issue, said Paul Lally, president of Gladstone Associates LLC, a mergers-and-acquisitions consultant. It is an industry “predominantly made up of first-generation businesses, with 95% privately owned,” he said. But family-owned businesses of all types suffer from a 70% failure rate in transferring to the second generation, Mr. Lally said. [email protected] Twitter: @dvjamieson