Before you can create a succession plan, you should have a continuity plan in place. It is a broader plan that accounts for everything that could interrupt the business.
A continuity plan can be put in place immediately, rather than phased in over months or years, said Kirk Hulett, executive vice president of strategy and practice management at Securities America.
In a recent report for the National Association of Insurance and Financial Advisors, Hulett offered 10 reasons why advisors should stop procrastinating and get a continuity plan together.
1. Your Clients. This one is obvious: Part of your obligation to clients includes making sure they will be cared for in case of emergencies. “If you have clients who own businesses, this is also a chance to show them what planning for the future of their business looks like,” Hulett wrote.
2. Your Staff. When the need for succession draws near, your staff will be “on the front lines — explaining the situation to clients, prospects, vendors and business partners,” Hulett wrote. “At the same time, they will be dealing with their own emotions — sadness, grief, fear, anxiety, possibly anger.”
3. Your Family. In addition to being fair to family about future plans, there is a financial aspect as well. Clients who do not know the future of your business are candidates to take their business elsewhere. That could hurt your family’s financial security.
4. Your Business Partners. If you are sick for any length of time, how will agency revenues be divided up? If someone dies unexpectedly, will their heirs be taken care of? These are questions that need to be answered.
5. Your Estate Plan. How will your stake in the business be handled should you suddenly die? Life insurance can help with this aspect, but the plan needs to be put to paper.
6. Your Prospects. Having a continuity plan can be “a great selling point when meeting with prospective clients,” Hulett wrote. “It shows that you practice what you preach, and that their needs will be met even in your absence.”
7. Your Peace of Mind. Having plans in place for sudden death and eventual succession can be difficult to get started and completed, but bring a tremendous sigh of relief when finished.
8. Your Speedy Recovery. In the event of a difficult or prolonged illness, the future of your company can be a major stressor if not properly planned.
9. Your Practice Valuation. From the time you become incapacitated, or die, your business starts losing value because of uncertainty. “Having a continuity plan in place can increase or at least maintain the value of your practice in the interim, as it helps ensure that clients and assets stay with your practice until the sale becomes effective,” Hulett wrote.
10. Your Income. You need income more than ever should an illness hit. Proper planning takes care of this need.