You may have addressed business continuity and succession planning for your FSP, but there are almost certainly areas that have not been covered, and these gaps may exist in your FSP.
In a previous article, we focused on the challenges a national disaster, like the Covid-19 lockdown, may bring to a business and the critical importance of planning for disaster and business continuity. Also discussed was why a business continuity strategy needs to be in place, tips for businesses during a disaster and the impact of a disaster on cyber security. (Read the article: “Is your business continuity plan up to date?”). In this article, we discuss considerations to make should another type of business disruption occur.
The Financial Sector Conduct Authority (FSCA) recently confirmed that clients and product providers must be notified at the passing of a Key Individual. This also applies to FSPs where no successor has been identified, including sole proprietors or ‘one-man-shows’. The executor of the estate, or family members if there is no internal contact person, are expected to fulfil this requirement.
In light of this, there are some points to consider for the executor of the estate, support staff member, or family member who will be carrying out this duty:
- How will the person know who the clients are and which product providers need to be notified?
- Are the clients’ and product providers’ contact details readily available?
- Is there a formal notification or template already drawn up that can easily be sent to clients?
- What will happen to the client files once the FSP is no longer operational?
Based on these questions, an FSP should keep a record relating to these details. This can include lists of clients and relevant product providers with their contact details. These lists should be readily available to the person elected to carry out this duty.
You can also draw up a formal notification letter in advance to reassure clients where there is an identified successor. If you have not identified a successor, you can draft a similar notification to assist the executor, which informs clients that they should seek out a new financial advisor.
Another aspect to consider is record keeping. Before the sequestration or liquidation of an FSP, the FSCA can insist that arrangements be made to maintain records. Steps therefore need to be taken to ensure your client files are protected. Even when there is an identified successor, you’ll need to consider the transfer of client records. These records may then need to be disposed of appropriately.
It is important to note that this may apply in situations where the Key Individual is temporarily incapacitated. In these situations, there is even a risk of losing clients if there is insufficient communication for how to manage matters in the interim.
Difficult as it is, take time to consider these factors, especially as it could affect the livelihood of those who are left to make difficult decisions, such as your family members. There are also unique situations to consider, such as temporary disability and how that could impact your business for a short period of time.
Succession and contingency planning should not be underestimated, and it is imperative that your thoughts and wishes are made clear and known to those around you. If you would like guidance or assistance with your succession planning, please contact your Masthead Compliance Officer.