A period of poor health could cause headaches for smaller firms. Here, four experts reveal how they maintain business continuity
Clients who are advised by firms in a network often have the assurance that a planner will always be on hand if theirs is unavailable. But what about firms where there might not be another planner to back them up when that moment comes?
“What happens if I become ill?” is a common question for clients, but it is not often one they ask their adviser in return.
Money Marketing took a deep dive earlier this month into the benefits of working at advice giant St James’s Place from the perspective of its planners.
The planners said that SJP’s “adviser guarantee” was a key consideration. This makes sure clients continue to be served should their adviser suffer hardship of some sort.
A locum equivalent for smaller firms arguably guarantees the same protection for the end-client.
Advisers under networks do not face the same responsibility of managing their own insurance, however, should a situation arise that keeps them away from work for extended periods of time.
Sole adviser firms are not able to outsource regulatory requirements and continue to hold responsibility for work being carried out by the nominated proxy, for example.
Susan Hill Financial Planning director Susan Hill says operating under Tenet removes any concerns about that responsibility. She adds: “If I was out of action, my locum would take control. It’s not just annual reviews, but also daily rebalancing or any action that is part of the authorised advice process.
“A locum agreement is vitally important, and my network would be able to take over my firm and make whatever arrangements were necessary, so being in a network is a huge benefit if you’re a sole adviser firm.”
Advisers say a locum should have a similar business structure, as well as similar values.
Meldon and Co director Mark Meldon says distance is also an important consideration so that clients are not disturbed unnecessarily.
His locum is 17 miles from Meldon & Co’s Cheddar offices in Bristol.
Meldon says: “My locum would step in; it’s in the agreement we have and I have full confidence in that arrangement.”
As a completely digital adviser, Money Honey Financial Planning’s Jane Hodges is already at an advantage, with less to consider when it comes to needing a physical location for a locum to take over.
She says: “All my clients’ meetings are on video conference and communications are on a client portal so it would be easier to support clients this way even in a situation where I was ill.
“As we are a two-man-band, the work would be covered by the other adviser should something happen.”
Both Hodges and Hill say the importance of a strong support team can go a long way in the absence of an adviser. Hill adds: “I am the sole adviser but I am definitely not a one-person firm and have a number of others working in my business who although are not authorised to give advice, could help if needed.”
Hodges’s firm has critical illness cover to offset the costs of paying other staff if they are needed to help administrators and paraplanners.
Addidi Wealth chief executive Anna Sofat now operates a two-adviser policy meaning an in-house adviser will always step in to cover another if needed.
She says: “I did appoint a locum as a one-woman business which was a bigger firm and logged all necessary information with a solicitor whose job it then is to make things run smoothly. I didn’t have to pay anything to the locum, but I would have done it they had asked for it, or if I thought it would provide a better outcome for my clients.”
While the FCA recommends that sole advisers consider how their business can continue to run if they are absent, it says having a locum is not a regulatory requirement in the FCA Handbook.
The authorised person or company that can step in has the ability to review the files of the adviser they are replacing and discuss issues about their business or products.
Red Circle Financial Planning director Darren Cooke says: “I have a personal arrangement with a firm that is close enough they could cover my clients, and I would pay them to do that. Firms should have income protection and cover in place to provide them with an income.”
Hill says the rising average age of advisers means the need for a suitable locum is vital.
She concludes: “It’s not just accidents or illness, but it’s also death in our ageing adviser population, and I don’t know why a sole adviser would be directly authorised when it is much safer for the client for the adviser firm to be aligned to a network who will have maybe hundreds of advisers available to help out.”