The Independent Advisor's
Succession Plan

What the SEC Wants to Require in Your Succession Planning


We recently discussed the costs associated with business continuity and succession planning, as outlined and estimated by the SEC’s proposed rules. The SEC is estimating up to $1.5 million in one-time costs and up to $375,000 in ongoing annual costs. But how do these costs add up? What, exactly, are you expected to pay for when it comes to your business continuity and succession plans?

How Business Continuity and Succession Plans Add Up

Business Continuity Costs

These are the costs associated with ensuring that your business could continue without you and avoid a major disruption in case of an emergency situation. The need for these plans come out of the financial crisis in 2008, which is something the SEC would like to avoid happening again in the future.

Maintenance of systems.

This includes the maintenance of your operations and systems in your absence. Who updates those systems and ensures they are running properly?

Data backup and recovery.

Client data needs to be protected. Are you backing up your data and do you have a reliable recovery system in case of data loss?

Pre-arranged alternative locations.

In the case of an emergency, where will you meet with your clients? You’ll need to make sure you have a place that’s safe and secure for client meetings.

Communication plans.

How will you communicate with your clients and staff in an emergency situation? You’ll need to make sure you can convey information quickly and clearly.

Identification of critical third-party services.

Does your team know who your third-party vendors are and what they do for you? You’ll need to identify them and make sure it’s known who they are and what they do for your business.

Succession Planning Costs

Who is prepared to take over your business in the event of your retirement or a medical emergency? You have an obligation to your clients to ensure you have a plan put in place, but there are costs associated with making successful plans for these situations.

Finding the right succession partner.

This can be incredibly expensive if not done correctly. You’ll need to find the right person who can take over your business in case of retirement or other unexpected emergencies.

Training succession team.

Once you have the right people, they need to be trained to handle your business. This will require time, money, and your attention to get it done right.

Client transition costs.

The costs include everything from setting up meetings between clients and their new advisor to marketing costs associated with the transition.

Are You Ready to Take It On?

Business continuity and succession planning are important steps to take as a financial advisor, but they are something that many independent advisors delay doing. Have you started? If you need to start making succession plans for your business, the best way to start is by partnering with a company like advisorRETIRE™ who can help you put a plan in place and execute it at the right time. Give us a call today or contact us through our website to find a succession planning partner for your financial advising business.

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