A Registered Investment Advisory Firm (RIA) founder/owner managed money using her own unique investment strategy and had few of her own direct clients but sub-advised to clients of other Investment Advisor Representatives (IARs) affiliated with her RIA as well as to clients of some unaffiliated RIAs. Upon her sudden and unexpected death, her spouse, who is not a financial services professional, was left to deal with the business. The deceased owner had run and managed the firm herself doing her own trading, compliance, and admin. When the owner died, the spouse, who was the executor of her estate, wanted to sell the firm and monetize his wife’s life work. Regrettably, there was no succession plan in place. Despite efforts by the unlicensed spouse to “get up to speed” on the industry requirements for managing through the situation post-death, due to the lack of pre-planning by his wife, and the surviving spouse’s lack of expertise in financial services, precious time was lost and the firm IARs left to join other firms taking all the clients with them. Our firm was contacted several months after the founder/owner’s death to assist with the sale of the business. There was no business to sell. The spouse was hopeful the firm name, phone number and trading strategy might be of value even though there were limited assets remaining on the books. However, a shell of a business with no licensed advisors, no assets, and potential legacy liabilities has no real value. The central asset and source of family revenue and support was gone.
It is astounding how many advisors, in particular advisors who are solo practitioners, do not have a succession plan. Often advisors think of succession as a plan for retirement; however, unexpected death or disability requires a plan as well. It seems incongruous that professionals who are and hold themselves out to their clients as trusted fiduciaries fail to do the basic responsible planning to ensure their clients are taken care of in the event of their own unforeseen death or disability. Today, the wealth management business is planning focused. Wealth planning professionals must not leave their own plan to the fates but prepare in ahead.