x Abu Dhabi, UAESaturday 22 July 2017

Even the advisers need end of life plans

Financial advisers and the clients they counsel often share a key attribute: an aversion to confronting their own mortality.

Financial advisers and the clients they counsel often share a key attribute: an aversion to confronting their own mortality.

Investors who wait too long to plan for the end might find their estate mired in a court battle. But advisers who fail to plan for their own demise may find United States securities regulators confronting it for them.

Securities regulations require advisers to have business continuity plans, which typically include contingencies for natural disasters or severe weather. But advisers often overlook the possibility of their sudden death or disability.

Many advisers simply ignore the question of how their businesses would continue without them, according to Matt Matrisian, the director of practice management for Genworth Financial Wealth Management.

The issue can be especially tricky for thousands of small or solo investment advisers registered with state regulators or the US Securities and Exchange Commission.

An adviser's unexpected death or disability can leave clients scrambling for information, from whether to place trades, or even where to find their money. Regulators often ask advisers about their plan to prevent those problems.

Advisers who don't have one will need to quickly comply - or draw unnecessary attention to themselves from examiners. At best, regulators will note the lapses in a letter to the firm and expect them to be fixed.

"As their financial adviser, it's your fiduciary responsibility to make sure your clients are taken care of should something happen to you," Mr Matrisian said.

Some solo advisers take a misguided approach to the question: "I just tell my clients that if I die, they have to find another adviser," said one adviser.

Custodial firms holding client funds for advisers, such as units of Charles Schwab and TD Ameritrade, will still be there even if he is not, the adviser said.

But it is more complicated than that, said Bryan Baas, the director of risk oversight for TD Ameritrade Institutional, the bank's custodial unit for investment advisers. Agreements that advisers' clients must sign with custodians like TD Ameritrade specify the name of the adviser who is allowed to trade on their behalf.

Mr Baas recalled instances in which TD faced the unenviable task of being first to notify a dead adviser's clients that no one was managing their accounts.

Solo advisers can spare clients that uncertainty by developing a plan to transfer the business to another adviser if they die. They can also give instructions for a worst-case scenario.

"If you're a one-man shop, you have to be clear about who to contact," said Benette Zivley, a lawyer at Munsch Hardt Kopf & Harr in Texas.

* Reuters