Business Continuity Plan (BCP)

Business Continuity Plan (BCP) for Advisory practice

The Novel Coronavirus (COVID-19) has affected the daily lives of millions and has impacted some to a far greater extent. Almost every business and industry have been affected by the virus—especially those businesses connected with the financial markets.  Government is trying hard to ease the damage caused by COVID-19 by providing various stimulus packages and liberalizing law and regulation thereby reducing compliance burden on businesses, but for now, the virus seems to be staying with us for long compelling businesses to develop alternate business practice.

For investment advisors, no greater case can be made to demonstrate the importance of having an effective business continuity plan in place.  Whether you lack a plan, or have an existing plan that is old or obsolete, it’s never too late to put an effective plan in place. 

we believe that the first step in developing a business continuity plan is to think about the size and complexity of your advisory practice.  Obviously, what will be appropriate for a large advisor with offices in multiple locations will not be appropriate or necessary for the thousands of sole proprietors working from a home office.  An advisor developing or implementing a business continuity plan, regardless of size and complexity, should at a minimum consider the following points:

• Off-site location

Consider the ability to transition your business to a secure off-site location.  Further consider that this site might be a home (a non-issue for many investment advisors who operate out of home offices) in the event of lockdown situation as prevailing in current time.  In such a situation, total reliance on physical files, if located elsewhere, to manage client relationships would significantly disrupt the advisor’s business in the event that access to these files is restricted or prohibited. To avoid this disruption, consider having a secure online database of important files and documents which you can accessed anywhere.

• Technology

The need to be equipped to work remotely using technology has been felt by businesses and individuals in these times like never before. In an era where margins are increasingly coming under pressure and competition is heating up, advisers need to adopt technology and automation to improve efficiency. Many advisers are already benefitting by transitioning to online platforms like Mutual Fund Utility, NSE MF II, BSE StAR MF, etc. This is helping them expand geographically without additional costs. Other areas where technology could help are customer relationship management (CRM) tools, research, portfolio view through website and mobile application.

• Effective communication plan

While email and phone systems are taken for granted, an advisor should consider the ability to contact employees, clients, third-party providers, and regulators, by means other than its primary systems.  For example, hosting a meeting with clients and employees through video calling app, utilising social media platforms like Whatsapp, Twitter, Facebook, Youtube, etc. to keep connect with your clients. Among this, use a tool that best suits your needs. Before utilising this tools, ensure that the system is encrypted and secure.

• Standard operating procedure (SOP)

The most critical thing there is ensuring that all of the policies and procedures are documented, so that in the event that there is someone who becomes unavailable, either in the short term or intermediate term or even in the longer term, that their responsibilities can be covered by someone else on the team.

If the firm has a sole person responsible for client engagements and that person is unavailable for a certain period of time, someone else has to step in those shoes, be able to address client requirements and meet with the clients when need it.

• back-up of third party services

Recently, as a result of volatility caused by coronavirus news, major custodians, broking house and other providers have experienced service issues that led them to wind up their business.  Such third-party system failures should be considered as advisors now increasingly (and critically) rely on third-parties, including robo advisors, to manage subsets of client portfolios. As a result, it is essential for advisors to review and evaluate the ability to survive of its service providers during times of crisis.

• Succession plan

A well thought out business continuity plan should also include provisions concerning succession of business in the event of demise of advisor or sale of the business. Most advisors start off their practice solo and it is only after they reach a certain stage in their life when they think about their retirement. This is perhaps the most overlooked aspect in most advisors’ life. Typically, majority of advisors in India get their family member to take charge of their business. But if you don’t have anyone within your family to take over the reins, there are three options available with you – sell or transfer assets, bring in a partner or institutionalize your practice.  Clients and your employees may not like discuss about succession directly with you but it is advisable that you prepare yourself well in advance. If you have a family member who will take over your business you should make him/her familiar with your practice well in advance. Also, it would help if you introduce your successor to your clients so that the transition is smooth.

Conclusion

These items, in addition to others that may arise based on the size and complexity of the advisor’s business, should be assessed and refined annually.   The bottom line is that it is certain COVID-19 has already, or will in the future, cause advisors to operate through secondary systems. For now, even in the midst of this crisis, it is important for investment advisors to revise business continuity plans as necessary, or draft one as a way to address potential issues.