Health and the unplanned exit
If you could not work from tomorrow, your clients, your staff and your family would need a plan that exists already.
If you could not work from tomorrow, your clients, your staff and your family would need a plan that exists already.
Some exits are planned for years. Others start with an illness, an accident or a death. For a principal-led firm, the second kind is harder on everyone: the clients lose their adviser without warning, the staff do not know who is in charge, and the family has to deal with a business they do not understand.
If you could not work from tomorrow, somebody would need to do the following straight away.
Write down who would do each of those, and check that they have the access and authority to do it.
A directly authorised firm needs approved people to carry out its senior functions. If the only approved person is you, the firm cannot run without you. Find out now who could step into those roles, and what notice the regulator needs. A firm under a network should ask the network what its arrangements are when an appointed representative's principal cannot work.
A lasting power of attorney for property and financial affairs lets somebody act for you if you lose capacity. Check whether yours covers your shares in the firm and your role as a director, and whether the company's articles allow the attorney to act. Some do not, and a separate business lasting power of attorney may be needed.
Check also what your will says about the shares, and whether there is a shareholders' agreement that sets out what happens to them on death. A family member who inherits the shares of an advice firm cannot advise its clients, and the value falls each month that nobody does.
Check what insurance the firm and you hold against your death or serious illness. Key person cover pays the firm a sum if you die or become seriously ill, which can fund the cost of keeping the firm running while a buyer or successor is found. Shareholder protection can provide the money for other shareholders to buy your shares from your estate. Income protection replaces part of your own income. Review each policy with your own adviser, and check that the amounts still match the firm as it is today.
Your family would need to find things quickly. Write a short document that tells them who your accountant, solicitor and compliance support are, where the firm's key documents are kept, who has access to the firm's systems, and who to call first. Keep it up to date and tell them where it is. Do not put passwords in it. Record instead who holds them and how they can be reached.
Tell your family what you would want to happen to the firm. If you would want it sold to a particular buyer, or a colleague to take over the clients, write that down too.
Put a date in the diary each year to review the plan. Check that the people named are still at the firm and still willing, that access details are current, and that the insurance amounts still fit. Tell the people named in the plan what they would be expected to do.
An advice firm whose principal is suddenly absent loses value while it waits. Clients move to other advisers. Staff look for other jobs. A buyer negotiating with a family under time pressure knows that the family has few alternatives.
A plan agreed in advance protects that value. It can be as simple as a reciprocal arrangement with another adviser, or as complete as an agreed buyer and price.
Under Securo, compliance, paraplanning and administration already sit with Equity & General. Clients' files are on Equity & General's systems, and the exit terms, including the floor on the price, are agreed in writing before you join. If you could not work, the firm would continue to be run and clients would continue to be served. The basis on which it would be acquired would already be agreed, and your family would not be negotiating it.
A principal who wants to keep advising part time needs the work arranged around the days they are in. Under Securo the back office runs on the other days.
Read it
Telling a household you have advised for twenty years that you are stepping back needs preparation, a meeting in person, and a plan for who comes next.
Read it
A buyer prices an advice firm partly on the client files: review dates, suitability evidence, service agreements and current data.
Read itSteven Bates, Director of Advisory at Equity & General, takes the first call with every adviser. Ring him on 020 8396 0486 or send a short note about your firm.