moncler sito ufficiale Continuity Plans for the In

(c)
Marion Daniel Article Feed :
References:
About the Author:
Keywords: , , , , ,
Category:
Georgetown Investment Company helps with financial practice transitions. We buy financial practices. If you are considering to retire and planning to sell your financial practice, we can help.
**NOTE** - has claimed original rights on the article "Continuity Plans for the Independent Financial Advisor" ... if there is a dispute on [url=http://www.osterblade.com]moncler sito ufficiale[/url] the originality of this article ... please contact us via our and supply our staff with the appropriate details of dispute (ie ).
Continuity Plans for the Independent Financial AdvisorArticle Summary: The solo advisor business model can offer many benefits such as the flexibility to develop your firm as you see fit, decision making without having to seek the approval from partners, and the freedom to spend your day as you choose. There are disadvantages, of which the greatest has to be the lack of a buy-sell agreement with another associate as exists in partnerships. Should you remedy that?
Article Source: uPublish.info
The solo advisor business model can offer many benefits such as the flexibility to develop your firm as you see fit, decision making without having to seek the approval from partners, and the freedom to spend your day as you choose. There are disadvantages, of which the greatest has to be the lack of a buy-sell agreement with another associate as exists in [url=http://www.shewyne.com/peutereyoutlet.html]peuterey outlet[/url] partnerships. Should [url=http://www.shewyne.com/woolrichoutlet.html]woolrich sito ufficiale[/url] you remedy that?
Twenty years ago, solos practicing in the advisory or financial planning world had few
concerns compared to today. Back then, most everyone participated in the exclusive sale of commissionable products as a means to service investor clients. Transaction-based insurance and early model mutual fund investments were the only products available to the advisor of yesteryear. If the practitioner retired, died or simply left the business, they extracted little, if any, value (usually a very short -term trailer based on past transactions). Client accounts became a house account, where they stayed eternally. There were few, if any additional responsibilities or obligations to the client.
Today's advisor lives in a different world. They offer a multitude of products and services, of which, a good percentage create recurring revenue streams. The client relationships are now on-going, rather than just a one or two time transaction-based occurrences. These and other factors force greater responsibility for the well-being of clients during and after any transition involving the advisor, than was needed in the past. Those who fail to plan for those contingencies that can affect the client relationship, such as retirement, death or disability, are not ultimately fulfilling their responsibilities. Another motivator to plan in advance for such occurrences, is that not doing so, could lead to you or your beneficiaries not receiving the full value of the business or worse, no value at all. So as a solo business owner how sustainable is your business model? Do you have a plan in place that ensures that clients receive a similar, consistent level of service in your absence?
Do you have a contingency plan in place, so if you died tomorrow, your clients would not be cast to the winds? Likewise, if something were to happen to you that extracted you from the business, such as a serious illness or disability, could you hire somebody and pay him or her a good market wage to handle your responsibilities in the office? Does your business generate enough free cash flow from your business to pay yourself and another advisor to work with clients under this scenario?
More than ever life brings uncertainties that we cannot control. Indeed, your career is all about guiding clients in planning for the unknown. Shouldn't you include, for their sake, a plan to deal with the contingency of your own sudden death or incapacity?
Less than 10% of advisors have a written practice continuation plan. The overwhelming
majority of these are solos who have an office sharing arrangement with another advisor or who have a junior associate within their firm who agrees to be a continuity partner. Why don't more sole practitioners have a practice continuity plan? Simply put, it is because most don't understand its use or the options available for designing one.
Deciphering the Continuity Agreement
Let's begin with a clear understanding of what these agreements really are and whom they serve. Ensembles or advisory firms with more than one owner have (or should have) in place a buy-sell agreement that details the ownership transfer process, should an advisor die or become disabled. The agreement should [url=http://www.shewyne.com/woolrichoutlet.html]woolrich outlet[/url] also lay out a detailed process for other contingencies, such as retirement, divorce, and handling disputes between the owners. A buy/sell agreement also helps to ensure that a seller or their beneficiaries get a fair price for their ownership share [url=http://www.xj0991.net/E_GuestBook.asp]hollister[/url] and to keep the business closely held. For firms with just one owner, a continuity agreement is the equivalent of a buy-sell agreement in a partnership. The agreement provides, that in the event of the solo's incapacity, death, or retirement, another adviser or advisory firm will step in and run the distressed practice during the period of incapacity or, in the event of death, conduct an orderly sale or possibly acquire the practice for himself or herself. A continuity agreement typically provides for some means of determining the fair market value of the seller's business and [url=http://www.rtnagel.com/louboutin.php]louboutin[/url] should also include a means for funding the purchase of the business. The differences between a buy-sell agreement and a continuity agreement are that in the first instance, the agreement is between insiders who are involved in the business on a daily basis.
In the latter instance, however, the sale or continuation services usually are provided by an outsider, with little prior relationship or exposure with the advisor's client base.
Continuity agreements are a fairly new tool in this industry that were originally developed with one key aim in mind: to assure that client needs are addressed in an orderly and timely manner. The foundation of these [url=http://www.mnfruit.com/airjordan.php]jordan[/url] agreements is clearly driven by the need to protect the solo practitioner's clients during or after their absence due to an unplanned event. In essence, he continuity agreement is a succession plan, with a carefully chosen person or company who contractually will become a successor to [url=http://www.shewyne.com/hoganoutlet.html]hogan sito ufficiale[/url] the solo practitioner under certain pre-determined occurrences.
There are two main types of continuity agreements:
1) A one-to-one agreement with another advisor (which may or may not be reciprocal); and
2) A group agreement, where a few different advisors may act as successors to each other's firms and clients may choose to place their business among any of the surviving firms.
The One-to-One Agreement
The one-to-one agreement is perhaps the method most suitable for those who [url=http://www.rtnagel.com/airjordan.php]jordan pas cher[/url] already have an individual successor in mind. Often it is an associate the advisor has known for years and whom they feel would be a good match for their clientele, should a sudden unexpected event cause them to be extracted from their business. Generally, the best matches of a continuity partner are those where the advisor shares similar business and personal philosophies.
Additionally, the partner should offer similar services to their own clientele and, very
importantly, should be within the same broker-dealer, if at all possible. It is more than enough for clients to deal with the sudden absence of their advisor. Being asked to transfer to an advisor in another broker-dealer will likely be too much for the average client to bear.
Circumstances that have required clients to move to another broker-dealer have proven to have low client retention rates.
There are three basic types of one-to-one continuity agreements:
The Stand-Alone Continuity Agreement-This agreement is what it implies: it [url=http://www.sczsq.com/wygkcn_GuestBook.asp]peuterey s[/url] is stand-alone in the sense that the advisor is not reciprocating with the individual who has agreed to step in to acquire the business under short notice. Some advisors prefer to find someone who is capable and desires to acquire the business without the advisor reciprocating.
The Reciprocal Continuity Agreement-This agreement is also what it implies: two advisors agree to reciprocally step [url=http://www.shewyne.com/moncleroutlet.html]moncler sito ufficiale[/url] into each other's businesses under certain pre-determined circumstances. Very often, because of the nature of a Stand-Alone Agreement, it can be difficult for an advisor to find another party willing to commit to the agreement without having the same assurances provided for them in return. This approach helps to balance that issue.
The Continuity/Acquisition Option Agreement-This agreement has a twist that the others do not. In essence, it provides for the committed party to step in to temporarily help manage the business with an option to acquire the business. Usually, an earn-out is the chosen financing method, to help offset the risk of buying an advisor's [url=http://www.shewyne.com/hoganoutlet.html]hogan outlet[/url] business under stress. Should the advisor not want to acquire the practice, the agreement calls for the party to help sell the business on a "best efforts" basis. Usually this requires the continuity partner receiving some financial remuneration for their efforts, either, in the way of a [url=http://www.fayatindia.com/giuseppe-zanotti.html]giuseppe zanotti pas cher[/url] salary for the period their involved, or a percentage of the businesses value when sold.
The Group Continuity Agreements
The concept of a group of advisors meeting for the purpose of standing in as continuity
partners for each other is a unique and creative method for solo advisors to protect their
business value. This concept has its roots in the study-groups that are typical of the industry.
The nature of the financial advisory business is ever changing with new regulations,
compliance, products and services each year. A study-group's purpose is to create a forum, where advisors can share information, concepts, and ideas.
Group Continuity Agreements have a similar aim. Through carefully crafted plans that protect the interest of all sides, the group develops an agreement that allows for the clients of a departed or deceased advisor, to become aware of the services of the remaining firms in the group. Each client can choose which advisor(s) to interview and be the ultimate decider of their destiny. In this model, the departed advisor's business ceases to exist (at least in terms of providing client servicing). A pre-determined value formula is derived in the agreement, agreed to by the parties, who will pay for each client relationship that is acquired. The acquisition of each client relationship is clearly considered an asset sale and not a stock sale. Provisions should be included in the Group Agreement that protect the confidentiality of all parties and that address non-competition concerns.
The Framework of the Agreements
It is typical that all continuity agreements call for the party acquiring the business to have the benefit of very flexible financing terms. This is necessary because of the sudden nature of the responsibility that the successor is to take on. Virtually all continuity agreements call for "earnout" financing, which, in sum, allows for the successor to pay the departed advisor or their beneficiaries, the value of the business over time through the earnings from the book of business.
As suggested earlier, a pre-determined value formula is typically established in the
agreements, which should be based on the net profits of the revenue stream from the newly acquired clients. This earn-out value and payment method may seem unorthodox to some, but clearly it is the only approach that assures that the successor [url=http://d-recorders.com/cgi-bin/aska.cgi?]Michael]moncler sito ufficiale The Fe[/url] is not strapped with payments that exceed the profitability of the transferred client relationships. Of course, the alternative is for an advisor to risk an unexpected catastrophic event without any plan in place and, therefore, not being able to derive any value at all from their business.
All continuity agreements should provide for these fundamental provisions:
* Provisions for various triggering events (death, disability, retirement);
* Continuation of the business with assistance from the seller in the event of the
* seller's temporary disability;
* Option to sell the business in the event of the seller's death, retirement, or
* disability;
* Formula for determining the fair-market value of the seller's business;
* Compensation paid to the continuity partner, when the seller is only disabled;
* Appropriate non-competition and solicitation protections [url=http://www.jeremyparendt.com/jimmy-choo.php]jimmy choo chaussures[/url] for both parties; and
* Indemnification and hold-harmless clauses to protect the incoming buyer.
Not all continuity agreements have to address both temporary and permanent contingencies.
In some cases, advisors feel that addressing anything short of a permanent departure, such as death or serious disability that permanently extracts the owner from their business, is risky and too complicated to plan for. Yet, when leaving out certain contingencies from these agreements, it tends to dilute the overall solution and leaves many to feel they only have partially solved their dilemma. It may make all parties feel more comfortable to know that plans can be crafted that financially reward a continuity partner even under a temporary or short-term absence of the owner.
Parties to a continuity agreement should develop an operations manual with a full set of up-todate documents describing all office and client procedures. These should include: key employees and their salaries; key broker-dealer and industry relationships and their nature; payroll processing information; bank account information; all contracts and lease agreements; a client roster and services provided to each; revenue and financial reports; and important recurring deadlines.
The advisor should also consider introducing the continuity partner to their clientele at a client appreciation dinner or annual meetings. Clients tend to greatly appreciate that their solo advisor has made contingency plans on their behalf. It also shows that the advisor practices what he or she preaches to them. It is also ideal for the advisor to have clients approve or bless the plan. When you keep them informed at this level, they will likely be complacent in signing any necessary paperwork and in meeting with the new advisor should the agreement come into play.
The staff should also be introduced to the continuity partner since they may be working
together. Doing so will go a long way in ensuring a smooth transition should the agreement be put into service. In many cases, advisors have approached their staff to enlist their help in formulating a continuity plan. Remember, that staff can make or break the success of any continuity agreement. Their on-going relationships with the clientele can go a long way in ensuring a smooth transition should the unexpected take place.
TIP: It is crucial that you revisit the agreement with your continuity partners on an annual basis. Discuss any concerns each of you have and be prepared to add or change any elements necessary to fit the ever-changing nature of individual advisor firms. It is an excellent idea to renew the agreement each year in writing, regardless if any changes were made to it or not. In some cases, the circumstances of the advisor or their continuity partner have changed so much that their participation in the agreement may no longer make sense. This process assures everyone is on the same page each and every year.
The Take-Away: Continuity agreements are the equivalent of the buy/sell agreement in partnerships. They allow for the solo advisor to address the biggest threat to their business, a sudden, unexpected event, extracting them from their livelihood. These agreements are flexible and should be crafted in a customized manner to address the specific needs of the parties involved. Never use off-the-shelf agreements for this purpose and always work with a qualified tax professional and attorney, who can guide you through the process of considering all the necessary aspects of your plans.
Written by: Succession Planning Consultants

The post has been approved 0 times