Succession Planning - A Regulatory Requirement?

RWA provides support services to a significant portion of the UK's GI broker sector. While RWA's client list may be impressive by any standards, all-too-often RWA is wrongly 'pigeon-holed' as being solely a provider of compliance services.

Having been at the forefront of GI sector consultancy for over 25 years, and with an ever-growing client base, we have also sadly come to terms with an increasing number of personal tragedies and crises arising through no fault of brokers, who are often good friends as well as clients.

As a result of this increasing headwind of change, RWA has further strengthened our consultancy services to help guide brokers where needed and provide much-needed support to assist in planning and managing change.

Succession Planning - A Regulatory Requirement

Succession planning has become a term often used by very slick operators to encourage us to think about selling our businesses, but I want to say a few words about succession planning in an RWA context of caring for our clients and the SME broking market in general.

RWA has been helping clients either sell or transfer ownership of their business for years, and we do it discreetly and professionally, but it is often not considered that there is a regulatory imperative to have in place a succession plan.

The FCA wants to ensure that all GI brokers have a plan for how they will manage issues relating to sustainability and vulnerability.

FCA guidance is clear that the long-term future must be considered and how this will impact on customers and the wider stakeholder.

Therefore, a succession plan must be part of the evidence in how a firm is run.

Throughout 2017, we witnessed a significant rise in what can best be described as 'crisis situations', which threatened the ongoing operation of client's businesses. These situations were born out of a number of factors, many of which could not be predicted, but all of which could have been mitigated, given the correct approach to succession planning.

This has really made us think about the message we need to emphasise, in particular to our smaller clients or indeed any client with control in the hands of solitary and/or ageing owners.

Here are a few examples:

Dementia:

This has hit us hard in 2017 with four cases of firms where a sole owner or key owner has been diagnosed with dementia. In three cases we were able to move quickly and involve family lawyers and accountants but in the fourth it was a member of staff who warned us and I am very proud of Ian Ritchie who devoted so much of his time for very modest fees to act as a locum and agent of the person concerned and arranged a most generous sale of the specialist book.

Best intentions - terribly executed:

Just one of a few where a broker in a small firm died and left his young number two the business in a poorly drafted will, which allowed the wife (who was incredibly well provided for in other ways) to challenge the will. Don’t scrimp on legal advice. The will was completed with the assistance of a compliance consultant!

Crumbling governance:

We are seeing more PI claims from firms owned and run by brokers into their 70s. In one case a broker chose to leave the business to loyal members of staff but then forgot to mention a possible PI claim which was rejected and the staff inherited a business with a £400,000 negligence bill to pay.

Personal tragedy:

The most common and often involving something horrible happening to family members. Having an idea of what you want to do when things for you or a colleague are unbearably stressful is a godsend.

Have a word with your RWA consultant (or if you are not a client get in touch with me). It can take as little as half a day to create a very solid succession plan. This plan not only tells the FCA how you intend to deal with retirement, death, tragedy or serious illness, but it also tells others what your intentions are and this can be set in stone quite easily without you having to take any drastic action just yet.

Every day someone is doing something within RWA which is supporting some type of crisis at a smaller SME broker. My plea is to do the compliant thing and work with us to put in place a succession plan (which can be changed at any time). It just makes thing a lot clearer and easier if something does go wrong.

 

 

About the author

Robin Wood founded RWA in 1992. He is an acknowledged Expert on insurance broker's duties and Conduct Standards and Risk Management and has been an Expert to the courts on a number of reported cases including ​Environcom v Miles Smith, The Café De Lecq case and Eurokey v Giles.

Robin is happy to advise anyone who wants to know how to meet good and reasonable standards of conduct and behaviour whether that be a sole trader or a regulator. Robin has written a number of important guide books on topics such as Training & Competence, The Duty of an Insurance Broker, The Insurance Act and Professional Standards of Insurance Brokers. A regular speaker at industry conference events and Masterclasses, Robin is an engaging presenter who is known for filling a room and providing a challenging and effective delivery. He is a Member of the Expert Witness Institute.

Robin Wood

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