Contingency Planning: 3 Steps to Overcome the Obstacles

By Mary Ann Buchanan, CEO, RIA Match on Wednesday, July 30th, 2014

A contingency plan is the first step in a succession plan. If you can take that first step, you are closer to your goal of safeguarding your clients, your employees, the value of your firm and your families.

The 2013 Fidelity RIA Benchmarking Study found two-thirds of participating firms (67 percent) reported they don’t have a succession plan ready for implementation. While this reflects an improvement from the 2011 Fidelity RIA Benchmarking Study where 75 percent of participating advisors reported not having a succession plan, it’s still inadequate for an industry with an average age of 52. The 2013 study also found that more than half of participating firms (55 percent) have not changed their approach or readiness for succession for the past three years.

Three Steps to Begin Your Contingency Plan:

Step 1: Set up a Business Interruption Plan

If a hurricane hits your area and some of your staff can’t reach the office or the office is no longer there; what happens next? Begin by cross training personnel on essential task and assign backup tasks. Keep data and servers off site and allow them to be accessed remotely. Be sure to document a plan to reach out to your clients to let them know of temporary changes in services. Laserfiche’s The Ultimate Guide to Financial Planning is an excellent resource. 

Step 2: Scalable Contingency Solutions Exist

One of the most difficult tasks is to find another financial advisor or firm that you feel is an appropriate contingency partner. Contingency plans and partners can change as your business grows. Better to start with some kind of plan than to have none at all. There are a few large RIAs who have built established systems and procedures. They offer their back office systems, investment management options and coaching to other RIAs. Some of these larger RIAs do not require that you join their firm; they are willing to offer their systems to you and allow you to remain independently owned. You need to determine if their turn-key solutions will work in your firm.

Step 3: Understand the Legal Components of a Contingency Plan

As you begin to address your contingency plan, understand the legal components that make up the foundation of the plan. You will need a Limited Power of Attorney (LPOA), a Buy/Sell Agreement and an Operating/Shareholders Agreement. It is best to use legal counsel that knows the advisory firm niche.
There is a need for advisors to put contingency plans and business interruption plans in place immediately. These plans can and should change and grow as your firm does. The initial plan does not have to be perfect. A stop gap plan will be better than no plan at all.

Mary Ann Buchanan is CEO of RIA Match, a website that offers financial advisors solutions for succession planning and growth. The website matches financial advisors with other financial advisors who want to buy, sell, merge or join practices. The advisors and RIAs can search for free and pay to connect anonymously and securely. Mary Ann can be reach at or 571-252-3247.

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