What's going on out there is why you're here.
By Lloyd Lofton | March 12, 2020 at 02:10 PM
All broker-dealers are thinking about which
employees might be able to work from home, as suggested by the Financial
Industry Regulatory Authority.
Even with increased telework, brokers and
dealers need to be informed and proactive to work with clients, market needs
and regulators as more information continues to be released and reported.
What exactly should broker-dealers be prepared
for?
·
Pandemic-related
continuity planning needs.
·
The flexibility of
existing business continuity plans.
·
How current pandemic
concerns and issues may affect existing or future needs of business continuity
plans.
FINRA provided these advisory’s in relation to
member firms to ensure their continuing ability to meet their existing
obligations to customers and relationships to other broker-dealers.
They are advised to conduct their own risk
analysis to determine where critical impact points and exposures exist within
the firm and their counterparts.
As I read these recent advisories to
brokers-dealers, I wondered about their small and midsize business clients.
Don’t these same concerns broker-dealers have
been advised about by FINRA — ensuring they are able to meet existing
obligations to customers — apply to the owners of the broker-dealers’
small-business clients in relation to their families, key employees and
customers?
These small businesses have three basic
options when an untimely or unexpected illness or death occurs (or a
pandemic-related event that disrupts the very fabric of their business):
1.
Keep it.
2.
Sell it.
3.
Liquidate it.
This article isn’t a “Planning Business
Continuity” primer, it’s a question.
In today’s economy, for example, the impact of
the loss, short-term or permanent, of a key employee is becoming a critical
question.
The very same questions and advisory FINRA is
giving broker-dealers are the things broker-dealers should and must take to
their existing clients and the marketplace.
Many business owners define “key” people based
on:
·
High
salary: High value put
on these employees.
·
Decision-making
power: They control
business direction.
·
Frequent
direct client contact: The
relationships that business success depends on.
·
Crucial
position: Product development,
production, technology or sales.
·
Special
talents: Difficult people
to replace.
In most small business, the owner is involved
in day-to-day operations and may be the most important employee of all.
What would be the economic impact if this key
employee were quarantined, sidelined, even for a short time?
Issues like these are just as important to
them as to broker-dealers:
·
Key man insurance.
·
Disability plans.
·
Buy-sell agreements.
Don’t these small businesses need to be
informed and proactively advised on ways to work with their clients, employees
and related businesses to protect against the risk of a pandemic occurrence and
its possible impact on their business?
Of course, they need to be prepared for issues
like:
·
Pandemic-related
continuity planning.
·
The flexibility of
existing business continuity plans as they relate or could relate to the
managing of the business.
·
Possible effects of current
or future pandemic concerns and issues that could affect existing or future
needs.
It’s important, timely and required that FINRA
inform, advise and require proper oversight of these issues within the
broker-dealer market.
The industry depends on them to provide
clarity, certainty and confidence in the broker-dealer operating models,
consistent with their clients’ needs and rights.
I submit that this holds true for
broker-dealers’ clients, that they go forth in the market and ask these same
questions to bring clarity, certainty and confidence to their clients.
Broker-dealers should conduct these same
reviews and advise the appropriate solutions, whether it be wills, trust,
buy-sell agreements, life insurance, critical illness, disability, annuities,
whatever underlying vehicle or instrument that will provide the small business
the same certainty and resources to protect their employees, customers and
family.
Now is the time for your CTA – Call To Action!
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