Here is a scenario that you obviously do not want to picture: You are in a motor vehicle accident and you are severely injured. You cannot work for months; you can’t even make work-related decisions.

Who will provide financial advice to your clients while you are away, and how will he or she be compensated? If you are never able to return to work, who will figure out what will happen to your firm and how it will be marketed?

Most advisors do not want to think about these questions. But when bad things happen, it may be too late to figure out what plans should have been in place. That is where continuity planning comes in.

Continuity planning is important to all advisors, their families and their clients, but particularly to planners in small practices. It addresses the need for continuing advice and service to clients if the advisor is suddenly unable to work. If you have an agreement with another advisor, that continuity partner can step in to advise clients if you are unable to do your job.

If an advisor dies without a continuity plan, an unfortunate burden is left on both the advisor’s family and clients. The family may be faced with having a business to sell when they are in mourning. And because the sad reality is that some clients will immediately start to look for another advisor, the family must rush to find a buyer before the value of the business declines and a sale is made at a deep discount.


Unfortunately, advisors are largely unprepared for the unexpected. “Two elements are involved with creating a continuity plan: economics and emotion,” says Matt Cooper, president of Beacon Pointe Wealth Advisors in Newport Beach, Calif. “And emotion can get in the way of making good solid decisions.”

Planners are often very proud of the business they have created and do not want to come to grips with the idea that they will eventually have to let it go. “Advisors by nature are driven individuals, and thoughts of being incapacitated don’t frequently occur,” says Jeremy Office, principal of Maclendon Wealth Management in Delray Beach, Fla. “The perception is that continuity and succession plans need to be complicated and expensive.” He thinks advisors need to get over these hurdles to better take care of those they care about.

A continuity plan can be different from succession planning. Succession planning is more long term in nature and outlines an advisor’s exit from the industry. A continuity plan covers the short term and ensures that clients continue to receive advice in the case of an unexpected disability or death.

And a continuity agreement is not always about maximizing the sale value of the firm. It is about creating a safety net for “what if” scenarios.

Seeking out a continuity partner can take some time, especially for solo advisors. Advisors should first think of someone whom they already know in the field and can trust.

Another option is to contact advisors in their area to discuss their needs for a continuity partner.


Once an advisor finds a continuity partner and the two agree in principal, it’s time to create a continuity agreement. Be sure to cover several points:

Trigger events: A continuity plan should cover death and disability — both temporary and permanent. Temporary disability covers any injury or medical event from which an advisor is expected to recuperate and needs a continuity partner to step in and service clients during the time of disability; permanent disability covers a situation in which an advisor is deemed forever unfit or unable to provide advice. This would involve a doctor’s opinion. A declaration of permanent disability would trigger the sale of the practice and allow the continuity partner to become the buyer.

Often, the death of an advisor would trigger the continuity partner to step in and immediately serve the clients; the practice would be sold to the continuity partner and the proceeds would go to the deceased advisor’s family.

Loss of license or broker-dealer status can also be a trigger event, according to Mitch Vigeveno of Turning Point, an executive search firm in Lutz, Fla., that works with advisors who need successors.

Valuation: Define how the practice will be valued at the time of transfer. The agreement should outline the valuation method or indicate a third party to be used to perform the valuation.

“Funding requires an accurate determination of value,” says Ryan Grau, director of equity management services at FP Transitions in Lake Oswego, Ore. “Starting with a formal valuation ... gives the advisors an opportunity to assess the type and length of funding necessary to maintain the cash flow of the business. Without adequate funding, you may be solving one serious problem while simultaneously creating a different and equally serious problem.”

Financing mechanism: Define either how the continuity partner will pay for the practice or, in the case of temporary disability, how the covering advisor will be compensated until the owner returns.
Disability and life insurance can be used to reduce the financial burden of a purchase or ensure that there are funds available. Cooper chose life insurance to fund buyouts among the principals at his ensemble firm. “Life insurance is the cheapest and cleanest way to fund the buyout, as it captures the value for essentially pennies on the dollar,” he says.

A life insurance policy held by the buyer can be an effective option for funding either the down payment or the entire purchase price, for pennies on the dollar, Grau says. “Lump-sum disability insurance is also an option for buyouts triggered by disability, but the policy is generally aimed at providing a down payment.”

Nondisclosure and nonsolicitation clauses: These are needed to protect confidential client information from being disclosed and ensure that clients are not solicited after the agreement ends or after the covering advisor stops standing in for the primary advisor.

Spousal consent: Experts advise planners to allow the advisor’s spouse to sign off on the agreement. “It is important to have the spouse sign and acknowledge the plan’s existence,” Grau says. “This ensures the spouse is aware of the plan to sell the business as well as the plan’s provisions and warranties.”


Once a plan has been created, advisors should communicate its existence, sharing highlights with staff, family and clients. This way, everyone knows what to do if something should happen to the primary advisor, and can take comfort in the knowledge that they will be taken care of.

In addition, the plan needs to be regularly evaluated and kept current. One approach is to schedule a yearly review of the continuity agreement to examine whether the valuation and funding are still sufficient. If insurance is used for funding, evaluate whether the policy size needs to be increased to keep pace with the value of the practice. Advisors should also adjust the plan for changes in the size of their client base.

No one likes to consider his own mortality, and advisors are no different. But we do not know what the future holds. The benefits of a continuity plan far outweigh any cost or time commitment. It is wise to plan for the unexpected.

Kevin Feehily is vice president and consultant at Byrnes Consulting in Kingston, Mass.

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