Welcome to Soundbites, weekly insights on market trends and investment strategies, brought to you by Investment Executive and powered by Canada Life. For today’s Soundbites, we’re talking about the importance of having a detailed business continuity plan, with John Novachis, executive vice-president and head of advisor growth and succession at Investment Planning Counsel. We talked about the risk of not having a plan in place, first steps in creating one, and we started by asking him to define a business continuity plan.
John Novachis (JN): A business continuity plan is really nothing more than a set of instructions that the owner of a business seeks to have executed in the event of some unforeseen catastrophe that could really impact the business. A business relies on people, it relies on processes, it relies on technology. It has to have continuity in the event of something happening — a cyber attack, something happening to a senior member of the team. It’s really a set of instructions that says if a certain event happens, this is what the business owner wants to have executed. And it’s a fluid document. It’s not a document that you set it and forget it. It’s something that should be reviewed annually as part of your annual business planning, to make sure you have the most current set of instructions if something unforeseen were to happen.
The stakes of not having one
JN: In many cases, in an advisory practice, the business is one of the largest components of the advisor’s net worth statement. A catastrophe can have very immediate impacts on the continuity of the business. I’ve actually seen it happen. 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, and they will go to clients and say, ‘I’m now here to look after you.’ And that can happen within hours of that catastrophic event happening, which would lead to almost a complete erosion of the business value within hours and days. [The] trickle-down effect to the family members, to the estate, can be huge. There will be no inheritance, because there’s nothing left.
Why time is of the essence
JN: When something catastrophic happens, people won’t wait, and people will listen to other stories and other opportunities. And it’s really important to be able to say, ‘Hey, something has happened, and this is what we’re doing about it. This is who is going to step in, in this advisor’s place.’ And that’s the kind of comfort and continuity that’s needed. 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?’
Key questions to ask
JN: At the highest level, it’s really about what should happen to clients, what should happen to team members, what should happen to the business. What do clients need to know? What do clients need to feel? How do we give them the comfort of continuity? And that’ll lead to a whole bunch of questions around, what do we say? When do we say it? What are the scripts? What are the letters that need to be written? Who are the clients that need to be called? What is the written communication that needs to go out? And then that would also lead into who the successor or incoming advisor is, what their background is, why they’re a great fit for the clients. And that whole communication and relationship strategy needs to get started. It really needs to get accelerated. It’s not something that we take a few months to think about and draft out. It really is a number of steps that address client, team members and the business.
And, finally, what’s the bottom line for advisors?
JN: Our own research about succession and business continuity planning says that people understand the importance, but there’s a disconnect between the understanding and the actual execution. The bottom line for advisors is, you have a business that is a significant asset that you own, that you’re continuing to grow and build. You need to protect it. You need to protect it from things that are beyond your control. 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. So, it doesn’t matter about your age, your tenure. Bottom line? Get it done.
Well, those are today’s Soundbites, brought to you by Investment Executive and powered by Canada Life. Our thanks again to John Novachis of Investment Planning Counsel. Visit us at investmentexecutive.com where you can sign up for our a.m. newsletter and never miss another Soundbite. Thanks for listening.
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