Critical Elements of a Continuity Plan

Not only does your practice represent years of hard work and dedication, it is also one of the largest assets you own. Yet less than 18% of advisors have a continuity plan in place. Many don’t know where to start and are overwhelmed by the thought of developing a continuity plan on their own. Although there are many turnkey continuity planning solutions available, it is important for advisors to know what should be included in their continuity plan.

Critical Elements To Include In Your Continuity Plan

Advisors should ensure that the following items are a part of their continuity plan:

Defined triggering events:

These are the events that will activate or set the continuity plan in motion. These include death, hospitalization, or other events.

Successor’s obligations:

These are the things the successor agrees to do, including items regarding staff and clients, securing valuations or other needed items for the advisor’s estate, and other things as agreed upon by the practice owner and their successor.

Terms of acquisition:

This section outlines all terms of the acquisition, including any financing or compensation payable to the advisor or his or her estate.

Method of determining value:

This section outlines the criteria that must be used to determine the value of the practice for any tax obligations or for probate.

Compensation to continuity provider:

This section defines the compensation payable to the person who keeps the practice running following a triggering event.

Non-competition/non-solicitation agreements:

This section protects the successor should the advisor or heirs try to solicit the client base or compete under another firm.

Hold harmless for incoming buyer:

This protects the incoming buyer from any liabilities or issues that occurred prior to or during the activation of the continuity plan.

The above sections are typically included in any turnkey continuity plan. Advisors can also include a section that provides for support staff or cross-referral support during the transition period, as well as any other provisions they and their successor or succession consultant deem necessary to protect all parties and the integrity of the practice.

Most advisors aren’t skilled at developing continuity plans. Just as you advise clients to seek out experts for financial planning, tax, and legal needs, you too should seek out an experienced succession team to help you develop your continuity plan. You don’t know what you don’t know. Which is also why you shouldn’t wait to get your continuity plan in place.

Get your Turnkey Continuity Plan now.

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