A global pandemic is not a good time for an advisor to be without a contingency plan for his or her business, yet almost two in three (62.5%) advisors lack one, according to a recent poll conducted by Succession Resource Group (SRG).
According to the Centers for Disease Control and Prevention, those age 65 and older are the high-risk demographic for severe illness from COVID-19, and given that the average financial advisor is 55 years old, there is a significant amount of advisors in the high-risk demographic, or precariously close to it.
Given the data, David Grau Jr., president of Portland, Ore.-based SRG, a succession and M&A consulting company for advisors, urges all advisors, but specifically those age 50 and above to start their planning early to prevent any unnecessary loss to their business due to any unforeseen tragedy.
During the COVID-19 pandemic, Grau announced recently that SRG, in an effort to bring greater awareness to the topic of planning for the unexpected, is offering a free contingency plan template to financial advisors from now until May 22, 2020. It’s meant to encourage advisors to make sure they put a plan in place in the event of their death or disability (permanent or temporary).
“We just want to remove one more barrier for advisors. We know advisors are busy and this is the last thing they want to think about right now,” Grau said. “Hopefully by doing so, we can help increase the awareness and kickstart the process for advisors, especially in times of need like this.”
In addition, Grau recommended advisors using this free contract to keep an updated annual business valuation to truly make the contingency plan turnkey.
“Contingency planning, unlike long-term succession planning, focuses on unexpected transitions, and requires advisors to actively monitor and update their plan and value.” Grau adds, noting the firm has heard of all too many “fire sales” where books of business needlessly go for pennies on the dollar. “With some broker-dealers now offering buy-back programs for desperate advisors, providing a fraction of the value and no definitive answer on who would serve their clients, we felt compelled to provide an alternative.”
As an example of effective contingency planning in action, SRG recently shared the story of an advisor in Hawaii who unexpectedly passed away. After being contacted about the advisor’s passing by Ameriprise field leadership, SRG was able to negotiate the sale of the advisor’s book of business to another Hawaii-based Ameriprise firm for fair value (100% cash down with a multiple of 2.59x), carrying on the late advisor’s legacy while also providing a positive outcome for clients, an employee and the advisor’s family.
In addition, SRG recently hosted a webinar titled, The Ins and Outs of Contingency Planning, which the company said received record attendance for the topic due to increased interest because of the current environment.
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Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
