Ten months after Hurricane Sandy shut down some advisors in the East for days and longer, the Securities and Exchange Commission is urging the industry to be better prepared to keep communications open with clients and workers and to have off-site capabilities in the future.

In a risk alert sent Tuesday, the regulator said the fiduciary duty for advisors requires them to have a business continuity and disaster recovery plan (BCP) in place.

The agency said an essential part of the plan is making it possible for key staffers, including portfolio managers, to work from home and other remote locations while a disaster and the recovery make normal operations difficult or impossible.

Nationally prominent and outspoken advisor Ric Edelman called the SEC pronouncement welcome news.

“Too many advisors have no continuity or disaster recovery plan, and most consumers have never given any thought to the notion that their advisor might be out of business one day.
Advisors routinely counsel business owners, and it’s time they followed their own advice,” he said in an e-mail to Financial Advisor magazine.

After interviewing 40 advisors in areas hit hard by the hurricane, agency researchers found those who hadn’t addressed and anticipated widespread disruptions experienced more service interruptions and inconsistent communications with clients and employees than advisory firms that did.

The report berated some advisors for not evaluating contingency plans of service providers.

On the positive side, the SEC report praised advisors for generally having the BCPs and distributing them widely.  The report pointed out some advisors developed a specific regime for the hurricane and its aftermath just before it hit.