Journal of Financial Planning: July 2024
Jessica Colston, PCC, is an executive business coach with Carson Coaching. She holds a bachelor’s degree from Grand Valley State University and a master’s in leadership and organizational development from the University of Texas at Dallas. She’s passionate about partnering with firm owners to bridge the gap between their current situation and their desired success. Carson Coaching is the exclusive coaching partner of the Financial Planning Association. For more information, visit www.carsongroup.com/coaching.
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Life is full of unexpected events. Remember back before March 2020? Life was humming along as usual when we were hit with a 100-year plague that sent all “non-essential” workers to the confines of their homes to attempt to keep their businesses up and running.
Those firms that had continuity plans in place probably had an easier time with the disruption. And those who didn’t may have struggled a bit more.
Here we are—four years later—and the pandemic is starting to become a distant memory. Many people have called their teams back into the office at least a few times a week if not all the time. And we might be getting comfortable again and neglecting our continuity plans.
And even though we’re now more comfortable working remotely, let this article serve as a reminder to revisit (or create) your continuity plan and get it into shape if it isn’t yet.
I like to divide continuity plans into two types: operational and key employee. But no matter what type you are trying to put together, it’s critical to engage in four critical steps: create the plan, communicate the plan, test the plan, and update the plan annually.
In this article, I’ll primarily focus on operational contingency plans and all the various elements you should consider when putting it together.
Having a business continuity plan is an insurance policy for your business. Advisers like to see that their clients have different types of insurances in place to protect them, but when it comes to having a continuity plan in place, FP Transitions reports that only about 10 percent of advisers have one.1
The Anatomy of an Operational Continuity Plan
Picture even further back before the pandemic. I worked at a firm where we had a situation that required us to leave the premises for three days.
We had an operational continuity plan in place in case something was to happen to our physical location that required us to work from home—but even with a plan, this incident put a halt to business as usual. Everything we were doing was taking longer. We were working on computers that weren’t our normal computers. And we didn’t have access to our normal resources. But the good news was that after this incident, our firm offered us greater resources, a more robust plan, and checks and balances for various types of incidents.
We had a plan and were still disrupted. This illustrates why it’s so important to have a more in-depth operational continuity plan—which is a contingency plan for technology usage, communication, trades, accessing data, and equipment, among other things. It is helpful when you cannot access your office, your teammates, or your technology.
The good news is that since the pandemic, we’re all better prepared for these types of things. In March 2020, our industry learned how to be agile and pivot, incorporate new technology, and figure out a way to safely collect and access client data away from the office. We already had a head start!
The key to preparing to build your operational continuity plan is outlining probable scenarios that could disrupt your operations. This could be anything from natural disasters, pandemics, technology disruptions, or the loss of a team member.
Secondly, look at any guidelines from your regulatory organizations, like the SEC or FINRA, and ensure you’re incorporating all necessary items that are required for compliance. After that, you can start creating your plan.
Four Steps to Building an Operational Continuity Plan
Step 1: Create the plan. Keep in mind that your continuity plan will vary based on the size of your practice, your staff, and your distribution channel. These guidelines are more for registered investment advisers who will need to plan for events on their own. If you work with a broker–dealer or wirehouse, you’ll likely have a plan already mapped out for you that you can implement. But if you’re creating your own, you plan should include the following components (in addition to those required by your regulatory organization):
Data backup and recovery for all data, financial, and operations assessments: A backup of all your data, books, and records is necessary. You’ll want these things stored in encrypted cloud accounts.
- Alternate means of communication with clients, stakeholders, and regulators: If your internet goes down or you don’t have access to cloud-based storage, you should have your client, regulator, and employee information accessible in a different way. Have access to client contact information so you can call them or write.
- Communications to clients: This plan should also have a process mapped out so you can reach out to your clients and inform them your business continuity plan for the event is in play.
- Outline of how clients will have access to their funds or securities: How can clients access their funds and securities if they’re not going through you? Make sure you document that and communicate it to them.
- Password management: We have subscriptions to many tech platforms. Ensure you have access to your passwords. You can look into a password management system to help, but keep in mind that any new technology will likely have to be approved by your compliance department.
You also need to clearly document all of this—and how it will be implemented—in a way that’s easy for everybody to understand. When you employ these plans, it’s probably going to be in a time of crisis. Make sure you map it out for yourself during a period of calm. FINRA’s template is a good one to use as a jumping-off point to help you create your own plan.2
Step 2: Communicate the plan. It’s not enough to just have the plan in place. You need to tell people what’s going to happen when the plan is activated. For the operational continuity plan, you want everybody on your team to know the details because any triggering event will likely impact everybody the same way—just like the pandemic did. We all needed to work remotely with the same access to systems from home.
Step 3: Test the plan. Professional basketball players don’t just get to the NBA finals without practicing their plays. They have to test them and ensure they run smoothly. The same is true with your continuity plan.
You can start simple, like having everybody work remotely to stress test your processes, communication, and technology. If you want to take it up a level, you can have a role play (think table read for actors) where you go through the plan and have every stakeholder talk about their roles, who they are supposed to communicate to, and what they are supposed to communicate.
If your tests uncover weaknesses, you should update the plan accordingly.
Step 4: Update the plan annually. Your firm may go through significant changes that need the plan to be updated. You might gain or lose clients, creating a need for you to update your data and physical contact lists. Your staff might change, creating the need for you to change your communications plan. You might change fintech platforms or move offices. This is why you must update your plan every year to reflect the changes your firm goes through year to year.
The Bottom Line
The pandemic happened. It’s likely not going to happen again for 100 years, but other events could derail your operations. Don’t wait until those happen to put together an operational continuity plan.
With the high rate of change in the world—and the increase in natural disasters and health crises—being prepared isn’t just about safeguarding your business, it’s also a testament to how you value your clients’ well-being. If you value your clients and you care about what happens to them, you need to care about doing this because it is important in fostering your clients’ comfort, security, and confidence in you.
Creating, communicating, testing, and regularly updating your plan ensures you rise above challenges, maintain regulatory compliance, and provide uninterrupted service—no matter what the world throws your way. Plus, we’re an entire profession full of planners—putting together a plan should be a cinch for us!
Endnotes
- See “How to Build the Best Continuity Plan for You” from FP Transitions at www.fptransitions.com/blog/best-continuity-plan-for-you.
- Download FINRA’s continuity plan template at www.finra.org/compliance-tools/small-firm-business-continuity-plan-template.