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Emergencies happen both in and out of the office. Here are some strategies to protect yourself and your clients.
When the you-know-what hits the fan, are you ready?
Several years ago, I was in Cabo, Mexico, riding through rugged terrain side-by-side with my friends. Each vehicle had GPS devices.
The guides on our trip told us that if we were to push the emergency buttons in Colorado, we’d be rescued by helicopter within 10 minutes. But in Cabo, we might as well smash the button with a hammer for all the good it would do us. No one would be flying to get us if we wrecked.
If something terrible were to happen, we’d be on our own. We had to ensure we had the equipment and know-how to act if things got messy.
Nobody wants to find themselves in an emergency, but they happen. Let’s look at different ways to be more prepared both in and out of the office.
Creating a crisis-management mindset
Before emergencies happen, both in your office and personal life, you can find yourself trapped in two different illusions. The first is believing that you’ll know exactly what to do in the heat of the moment.
You’ve convinced yourself that you’ll know exactly what to do when the SEC shows up to do an audit, the microwave in your breakroom catches fire, or you find yourself in an active-shooter situation. You believe you’ll be able to keep a clear head and flawlessly execute each step despite never having an action plan.
Conversely, advisors may not want to think about worst-case scenarios because those things happen only to other advisors. Other offices could catch on fire, but not mine. Other advisors get booted by their broker-dealers or lose key employees – that’ll never happen to me.
It’s easier to ignore statistical reality and believe nothing terrible would ever happen to you – until it does. Then you are helpless.
No, you won’t be able to find an attorney the evening when the SEC shows up at your firm in the afternoon, which is why you need to see one now.
Where else could this be happening in your practice?
Planning for unexpected scenarios
I hear advisors brag about how their crucial employee has been with their firm for years and would never leave.
That’s like believing you’ll never get in a car accident – it’s the wrong approach. Assume that your crucial person could leave tomorrow without notice, and they’ll take all your clients with them.
As far-fetched as this may sound, it's not an unrealistic scenario. I know advisors who have been through this. A good friend once returned from vacation to find his team had mutinied and taken everything with them, leaving the advisor with an empty office.
Walk through this scenario – and others like it – and think about what you’d do. How would you recuperate a loss such as this?
Financial planning and risk-management strategies
We’ve all been caught up in the hunt for shortcuts, quick fixes, and silver bullets. The profession is riddled with magical solutions that promise you’ll reap all the benefits without real work. I see it in social media campaigns, Facebook ads, and brochures.
But mythical silver bullets also apply to emergencies. People think calling 911 is a shortcut, so they don’t need to learn CPR or the Heimlich maneuver, which sounds like a great plan until Steven from accounting chokes on a carrot during lunch. Steven’s turning blue, but the paramedics are 10 minutes away. What will you do then?
Not only do you need to have skills and a plan in real life, but you also need to have an emergency plan in place for when things go wrong with your broker-dealer or RIA.
If your broker-dealer relationship goes south, you can’t expect the owner to save you. You can’t count on them to have your back. You need to have other allegiances outside of your firm.
You need someone you respect and can trust outside of the guardrails you can lean on if things go wrong.
I spend much of my vacation time off the grid in places where my team cannot reach me. It would be foolish to leave my team unprepared for an SEC visit or any other catastrophe while I’m away.
I’ve created a single-page action plan with phone numbers and step-by-step instructions outlining what to do if a crisis happens while I’m gone. Before I leave for any trip, I sit down with my team to review this plan and the order of operations.
My team should first call my partner Micah’s cell phone, and my team has direct permission to do whatever Micah says until they can get a hold of me. Finding relationships like this can be challenging to cultivate, and I’ve been very fortunate to be able to lean on him.
If you experience a crisis in your practice, say the SEC shows up, your broker-dealer drops you, you’re working with Washington Mutual, Arthur Anderson, or any other of the dozens of firms that shut down seemingly overnight, you’ll need a confidant to help you.
When you’re in disaster-recovery mode, it can be hard to detach yourself emotionally and look at the issue with a level head. Have someone in your corner who’s removed from the situation and can guide you.
Advisors who don’t have someone to support them would do well to join a mastermind or a coaching program that fosters these connections.
Have safety nets
Just as we all hope we don’t have a fire at home but have smoke detectors and fire extinguishers, you need a disaster-warning system. We all have blind spots in our firms and areas that could become problematic.
You need someone who can look for problems before they become significant. Again, this is where masterminds can be a powerful tool. Having extra sets of eyes to dig through your processes can help you catch little problems before they snowball.
Action Items
In an emergency, the only actions that count are the ones you take.
Do emergency drills with your family. These drills can be as easy as practicing house fire-escape plans, how to repair a flat tire, or taking a Red Cross CPR clinic.
In your practice, document logins and access things like your custodian and mission-critical programs in case you lose your key employees.
More importantly, review your contingency plans if something happens to you. You need to outline what happens to your clients so they are protected. You can’t hope your spouse or broker-dealer will figure it out.
Matthew Jarvis, CFP®, ChFC, is the co-founder of The Perfect RIA, one of the industry's most recognized advisor training platforms. Just 10 years prior, Jarvis was buried in debt, with a badly struggling practice and a morning routine of trying to figure out how to quit the industry without looking like a failure. Through several turns of fate, Jarvis clawed from near failure to the top of the industry. Today, alongside running his incredibly profitable and successful practice, Jarvis guides other advisors on duplicating his success in their practice.
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Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.