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PRACTICE MANAGEMENT

Contingency planning to help serve your clients in case of a crisis

Four financial professionals seated at a conference table in the evening

Key points

Short and long term

Planning for one-day to long-term interruptions is important.

Engage others

Solicit outside resources as backup during times of crisis.

As a financial professional, your No. 1 priority is your clients’ financial well-being. While you work hard to secure their interests, unexpected challenges can take place impacting your practice. They may range from physical destruction of your office, records and technology systems from severe weather to a health event where you or team member is out for a medical need. By taking steps today, you can ensure your clients are cared for, and the value of your business is protected in case a crisis would happen.

Make a game plan

While it’s never fun to consider worst-case scenarios, a contingency plan can give you confidence.

Begin with client experience. What kind of service do your clients expect? What if a day of crisis turned into a week, or longer? What functions would be most critical for giving clients seamless, prompt service? What concerns might they have?

Think short and long term. While you may be able to manage disruptions of a day or two with minimal interruptions to client service, you may need to prioritize a few key functions in a longer-term emergency. You might also need to reach out to your parent firm or other business partners for assistance. In your contingency plan, list who is backup for each function. Share that list with all employees in the office.

Empower your staff.  Involve key employees in your planning process. Work together as a team to imagine some scenarios and create checklists of responses. You might want to set up a crisis management team to oversee staff training for unforeseen events, such as an office evacuation, extended power outage or other emergency.

Make your wishes known. Does your staff know what steps to take if something happens to you personally? Write down a set of instructions, including important contacts, insurance coverage and financial information (including how to treat company stock).

Manage for continuity

As a financial professional, you may handle many day-to-day operations yourself. But what happens to your business if you suddenly become unavailable or lose a core staff member? To ensure a consistent client experience, look for ways to systemize and document procedures such as client on-boarding or billing.

Many financial professionals are moving toward automating or outsourcing more functions, such as marketing, billing or even portfolio modeling. In some cases, these services may already be offered by your parent firm. Such strategies have the added advantage of creating the kind of operational consistency potential buyers look for in valuing a financial services business.

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Create an emergency sucession plan

You may be years from retirement, and finding a successor may be the last thing you’re thinking about, but what happens to your practice if something happens to you?

  • If you have a potential successor in mind, do an honest assessment. Does this person have the experience, qualifications and bandwidth to take on your practice at a moment’s notice? Can you involve them more in your business now, while arranging the financial and operational support needed to succeed?
  • If selling your practice is the best option, do you have an estimate of what it’s worth? You might consider having a professional valuation done, while documenting key performance metrics such as gross operating margins and client retention rates.

Whatever your strategy, you’ll probably need to plan for a transition period. Some financial professionals partner with a team of colleagues to provide backup for one another in an emergency or until a buyer can be found. You may also want to prepare a letter and phone script that lets clients know of any management change, while communicating your confidence in the person you’re leaving in charge.

Involve key partners

Your broker-dealer or custodians can be important partners in any crisis or transition. In some cases, they can help find an interim backup or a potential buyer. They may also provide resources—such as online account access, marketing materials or turnkey managed accounts—that can ensure a seamless client experience.

As a start, touch base to find out how client accounts are handled if something should happen to you. You may also need to file paperwork in advance to designate a successor.

Addressing other business risks

Contingency planning also means addressing other business risks that might impact your business:

  • Plan for working remotely. Many financial professionals have migrated to secure, cloud-based data storage and software systems so employees can conduct business anytime, anywhere.
  • Safeguard important information.  Revisit your data security protocols and implement two-factor authentication to protect sensitive client data.
  • Retain key employees. Consider an incentive structure to reward staff members and review partnership and non-compete agreements to safeguard your client base.
  • Keep your best clients happy. Implement a client segmentation strategy to identify and reward your most valued clients. Satisfaction surveys are a good way to communicate your commitment to client service.
  • Protect your profitability. Review your profit and loss statements regularly and look for ways to diversify your revenue streams, including cross-selling and fee-based services (if eligible as an investment adviser representative).

Revisit your contingency plans regularly

Contingency planning is an ongoing process that may grow with the needs of your business. Set a goal of revisiting your plan at least annually—updating your emergency checklists and key financial information.

You may also need to adjust your succession plans and other policies as needed. By taking the time to keep your contingency plan up to date, you can rest well knowing your clients will be cared for and the value of your practice preserved.

 


 

The concepts presented are intended for educational purposes only. They may not be suitable for your client’s particular situation. The suitability of any specific product or strategy will be dependent upon your clients’ particular situation. Check with your organization for any specific requirements or restrictions they have related to client-related activities.

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