A continuity agreement for a financial advisor is a legal document that ensures an advisory practice continues serving clients without interruption if the principal advisor dies, becomes incapacitated, or is otherwise unable to continue practicing.
Think of it as the advisory equivalent of a business succession document. If something happens to your advisor, who steps in immediately? Under what terms? And how are clients notified? A continuity agreement answers those questions in advance, not in the middle of a crisis.
Clients rarely think about this until it matters. When it matters, it matters urgently.
Why Continuity Agreements Exist
FINRA requires member firms to maintain written business continuity plans (BCPs). But those plans focus on the firm level. For solo practitioners and small practices, the firm and the advisor are often the same person. A business continuity plan that doesn't specifically address advisor-level incapacity or death leaves a significant gap.
According to FINRA's guidance on business continuity planning, member firms must address succession of management and communication with customers in all business continuity plans. For practices where one advisor is the primary or sole relationship manager for clients, a standalone continuity agreement is the mechanism that addresses this requirement at the individual level.
Without one, what happens to clients is determined by circumstances, not by the advisor's intentions.
What a Continuity Agreement Covers
A well-constructed continuity agreement typically addresses:
Successor designation. A specific named advisor, firm, or mechanism is designated to step in immediately. Not "someone will figure it out." A named person or entity with pre-defined responsibilities.
Client notification process. How and when clients are notified of the change, who makes the calls or sends the letters, and what the message includes.
Account transfer authority. How accounts are transferred to the designated successor, on what timeline, and under whose authority.
Compensation terms. What compensation flows to the estate or the incapacitated advisor's family, and how the acquiring party compensates for the practice they're receiving.
Term and review. How often the agreement is reviewed and updated, and under what conditions it can be modified.
What Clients Get From a Continuity Agreement
As a client, you benefit from a continuity agreement whether or not you've ever heard of one.
It means your accounts don't sit unmanaged for weeks while the advisor's estate or firm figures out what to do. It means someone already knows the plan before the crisis happens. It means you get notified quickly and clearly, rather than hearing secondhand or discovering on your own that your advisor is gone.
Jeff Judge at Chesapeake Financial Planners is direct about this: "A continuity agreement isn't optional if you take your clients seriously. If you have clients who depend on you and you don't have one, you're leaving them exposed. That's not acceptable."
The Connection to Succession Planning
A continuity agreement and a succession plan are related but not the same thing.
A continuity agreement handles the immediate: what happens today if the advisor cannot practice. A succession plan handles the longer arc: what happens over the next 3, 5, or 10 years as the advisor transitions toward retirement.
You can have one without the other. But a practice that has a succession plan without a continuity agreement has covered the planned scenario without covering the unplanned one. That's backwards. The unplanned scenario is exactly the one where documentation matters most.
A complete approach has both.
How Chesapeake FP Approaches Continuity
At Chesapeake Financial Planners, continuity agreements and succession documentation are part of the standard operating structure, not an afterthought. Every client relationship is documented in a way that would allow a designated successor to step in with full context. That's not just good business practice. It's what clients deserve.
For advisors considering Chesapeake as a potential successor party in a continuity agreement, or for clients who want to understand how their current accounts are protected, schedule a conversation with Jeff.
Frequently Asked Questions: Continuity Agreements for Financial Advisors
Are financial advisors required to have continuity agreements?
Not by a single federal rule, though FINRA's business continuity planning requirements for member firms effectively require coverage of this issue. Independent RIAs registered with the SEC must also maintain business continuity plans under SEC regulations. A standalone continuity agreement is the most direct way to address advisor-level incapacity.
How is a continuity agreement different from a buy-sell agreement?
A buy-sell agreement governs the transfer of ownership interests in a business, typically between partners. A continuity agreement is specifically about the continuation of client service and practice management in the event of an advisor's incapacity or death. They often coexist in partnership-based practices.
What happens to my accounts without a continuity agreement?
Your assets are still held at the custodian and are protected. But active management, planning updates, and responsive service may be disrupted for weeks or months while the situation is resolved. The disruption depends on how organized the firm is and whether the broker-dealer or custodian has protocol in place.
How often should a continuity agreement be reviewed?
At minimum annually, or when significant changes occur in the practice: key staff changes, significant growth or contraction in the client base, or changes in the identified successor's availability or willingness to serve.
Can I ask my advisor if they have a continuity agreement?
Yes. It's a reasonable question for any client to ask, particularly one who has worked with the same advisor for many years. The answer tells you something important about how seriously your advisor takes long-term client care.
The information provided is for educational purposes only and should not be construed as investment advice. Investment strategies should be tailored to individual circumstances, risk tolerance, and goals. Past performance doesn't guarantee future results. Consult with qualified financial professionals regarding your specific situation.
Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Great Valley Advisor Group, a registered investment advisor and separate entity from LPL Financial.
Chesapeake Financial Planners | 2402 Scotlon Ct, Forest Hill, MD 21050 | (410) 652-7868 | www.chesapeakefp.com
