Succession planning, long an issue of concern for advisors, has become more like a three-alarm fire this year due to new regulatory requirements — and Pinnacle Advisor Solutions’ PRISM program is benefitting from the rush.

The PRISM program allows advisors to partner with Pinnacle’s parent company, Columbia, Md.-based RIA Pinnacle Advisory Group, to create a succession plan in case of contingencies.

“We developed Pinnacle Advisor Solutions to support other wealth managers by providing the resources and scale that we have built in our own practice,” says Peter McGratty, vice president of strategic partnerships at Pinnacle Advisor Solutions. “We looked around and realized there were not a lot of good solutions for succession and contingency plans, so we created one of our own.”

In April, the North American Securities Administrators Association issued model rules for continuity and succession planning that are under consideration for implementation by state regulators.

“Based on their model rules, which will be adopted by the states over the next few years, having a formal continuity or succession plan will move from an industry best practice to a regulatory requirement,” McGratty says.

Since NASAA released its proposal, Pinnacle has seen a surge in interest in its PRISM program—such a surge that it is making plans to cap the number of plans that it will offer.

“We’ve estimated that there are something like 13,000 state-regulated RIAs impacted by the new NASAA rule, and we’re already receiving a good amount of interest,” McGratty says. “We have to consider our ability to absorb these firms when the time comes. We have the capacity to absorb additional firms, but we can’t just enter into one of these agreements with all 13,000 RIAs.”

While McGratty could not pinpoint the number of inquiries he has received and level of the cap, he does say that current interest is between 30 and 60 percent of Pinnacle’s proposed cap. Once the number of plan participants reaches its cap, the company will begin turning away inquiring advisors.

The NASAA rules signal what could be a sea change for the advisory business.

“They began investigating contingency planning because of some of the major weather disruptions over the last few years,” McGratty says. “They want wealth managers to have business interruption plans, back-up facilities, and a way to back-up clients’ data, like using a cloud-based system.”

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