Day in and day out, you counsel your clients about their financial preparedness—encouraging them to save more for retirement, put asset protection strategies in place, plan for educational funding and dampen the financial pain unexpected health problems could wreak on their life savings. In essence, you ask them to prepare for that inevitable “rainy day.”
Yet when it comes to protecting your own most valuable asset, your business, from that same rainy day (or, more recently, from a hurricane), you are likely just as guilty of the same blasé attitude you gently chide your clients about.
Though SEC rules don’t expressly mandate a business continuity plan, part of your fiduciary obligation to your clients is taking steps to protect them when you can’t provide advisory services. (It’s also good business!) Not only must you make a succession plan to ensure continuity if you die or become disabled. You must also be able to keep delivering advisory services in the event of disaster.
The failure to meet such fiduciary obligations not only leaves you vulnerable to regulatory scrutiny, but perhaps, more important, it can cause irreparable damage to your firm’s reputation and the trust of your clients and partners.
An All-Too-Painful Wake-Up Call
It seems once or twice each decade a major disaster sneaks up and reminds us not only of the fragility of life but also the folly of our belief that our businesses are impervious to havoc. Like teenagers climbing behind the wheel of a car, we typically go about our daily business wrapped in a cloak of perceived invincibility. Then events like Hurricane Sandy hit home and, at least temporarily, rattle those beliefs and cause us to begin questioning our business continuity practices.
Unfortunately, since Hurricane Sandy, we’ve likely already forgotten about the problem. It doesn’t matter whether we were among those advisors unaffected by the storm or among the 8.5 million who lost power and suffered some property damage. Our thoughts of disaster preparedness have already settled into the background—quickly supplanted by the constant demands of day-to-day business management.
The question you need to ask yourself is this: How many warnings do you need before you take action?
Staying On The Grid
Although continuity plans are simple and relatively inexpensive to create, advisors often overlook preparations for their two most pressing needs during a disaster: power and connectivity. While some big firms have multiple offices and can handle it if power goes out at one of them, the vast majority of smaller firms, those with offices concentrated in one area, can’t shift their resources to backup offices quite as easily.
Don’t Just Plan, Document
Clearly, making contingency plans is an essential part of your responsibility to clients. But let’s be honest, it will likely be years before those plans ever need to be implemented. Staffing turnover will occur, roles and responsibilities will shift, and your business systems and practices will change. So it’s critical to document your business continuity policies and procedures. Furthermore, you should test, revisit and revise them—at least annually.
My New Jersey-based firm, MarketCounsel, stood directly in the path of Hurricane Sandy. It would have been easy to get overwhelmed by the devastation happening all around us. But we had a well-documented plan, a staff who understood their roles and responsibilities, a fully implemented technology backup plan and a culture of fortitude. Those qualities enabled us to maintain operations during the storm and return to normal operations immediately afterward.
A number of firms (including ours) have developed business continuity plan prototypes and workbooks you can use as a baseline for building your own plan. Now is the time for you to take action. Both your business and your clients are depending on it.
There are several steps you can take to significantly improve your preparedness:
1. Make sure that at least one person at your firm has a generator and an adequate supply of gasoline on hand to power it for several days. As many found out during Hurricane Sandy, an interruption in power is a real pain. But access to fuel afterward might be next to impossible. A shiny new generator sitting in your basement without sufficient fuel to run it is nothing more than a very large and expensive paperweight.
2. All key personnel at your firm should be equipped with alternative wireless data connections to enable ongoing communication (either satellite or cellular). Keep in mind that your corporate e-mail may be down, so consider other ways of communicating such as text messaging and/or separate Twitter feeds: one for internal team communications and another for external client communications.
3. Plan for the possibility that your server(s) may be down for several days, preventing access to critical client data. It’s time to seriously consider migrating essential business functions such as e-mail, portfolio management and client reporting—along with critical documents—to secure cloud files to help ensure uninterrupted access.
4. In the event of a disaster, set a time each day for key personnel to connect using an outside conference line. Depending on the size of your firm, you may want to establish a schedule for multiple calls, such as a separate call for managers, followed by individual team accountability checks between each manager and his or her direct reports.
5. Take inventory of the little things. Examine all of your day-to-day business practices with an eye toward potential problems that could arise. You must remember to manually lock your office doors, for instance. (If the doors use electronic key card locks, they will unlock during a power outage.) You must also remember to call FedEx, UPS and the post office, asking them to hold package deliveries so that important client documents will not be left unattended. These are all critical steps that must be undertaken to prevent any possible security breaches.
Brian Hamburger, JD, CRCP, AIFA, is the founder and managing director of MarketCounsel, the leading business and regulatory compliance consulting firm to the country’s pre-eminent entrepreneurial investment advisors. He is also the founder and managing member of the Hamburger Law Firm.