(Runtime: 5:00. Read the audio transcript.)
**
Having a business continuity plan (BCP) is one of the best ways to ensure client needs are met and preserve a firm’s value in times of crisis, says John Novachis executive vice-president and head of advisor growth and succession with Investment Planning Counsel.
Speaking on the Soundbites podcast this week, Novachis said when an existential risk strikes, a financial management practice becomes vulnerable not only to the chaos of the event itself but to predatory risk in the market.
“I’ve actually seen it happen,” he said. “An advisor suddenly passes away. No plan, no succession strategy, no business continuity strategy. Once news travels, there seems to be a lot of sharks that come out. And those sharks will prey.”
Novachis said if clients and key personnel are poached by competitive firms, that will immediately reduce the value of the business.
“[The] trickle-down effect to the family members, to the estate, can be huge,” he said. “There will be no inheritance, because there’s nothing left.”
Novachis said a catastrophic event could be anything from a cyber attack to the death or debilitation of a key executive. Having a reaction plan in place will ensure responsibilities are shuffled around so clients continue to be served.
He described a BCP as a fluid document that should be reviewed on an annual basis to make sure it can be implemented at a moment’s notice.
“A business relies on people, it relies on processes, it relies on technology. It has to have continuity in the event of something happening,” he said.
Communication with clients is a big part of that, he said.
“It’s difficult enough for clients to hear their advisor has been involved in a tragic or catastrophic event, but they also need to hear the comfort of, ‘What’s going to happen? And who’s going to look after my money?’”
Among the high-level questions a business continuity plan should answer are:
- what team members and clients need to know;
- what kind of communication needs to be prepared and by whom;
- who the successor or incoming advisor will be; and
- what their background is and why are they a great fit for the clients
“This not something that we take a few months to think about and draft out,” Novachis said. “It really is a number of steps that address client, team members and the business.”
The bottom line for advisors, he said, is that their practice may be the most valuable asset they have.
“You need to protect it from things that are beyond your control,” he said. “We can control how well we look after our clients. We can control the great experience that we deliver. But things that we can’t control can have devastating impacts on the business that we’ve created.”
**
This article is part of the Soundbites program, sponsored by Canada Life. The article was written without sponsor input.