Over the years, we’ve assisted hundreds of advisors in navigating the intricate process of transitioning to new broker-dealers. Recently, a pretty unique question came up in a conversation with an advisor discussing a promissory note: “What happens if I get hit by a bus?” (Curious fact: government statistics report 183 bus-related accidents daily, emphasizing the odd relevance of such inquiries).   

When dealing with Broker-Dealer (BD) transition packages, promissory notes are a common aspect, typically expiring after a term ranging from 5 to 9 years. The pressing question was, if an advisor becomes incapacitated during this term, are they still liable for the note? 

In short, the answer is “yes.” Like any other debt, it persists even if the advisor is unable to fulfill their obligations. 

Mitigating the Risk: 

Firstly, it’s crucial to recognize that while the risk exists, it’s relatively small. Moreover, it’s likely you’ve already safeguarded yourself in other areas of your life, such as with life insurance, wills, and trusts.  

Extra protections are available, and worth considering especially because they can be easily offset by the significant financial gain of moving to a new broker-dealer.  

• Life Insurance Plan: Engage in a conversation with your insurance agent about a life insurance plan that would cover the remaining balance of the promissory note. This ensures financial obligations are met in case of unforeseen events. 

• Buy/Sell Agreement: Explore the possibility of entering into a “buy/sell” agreement with another financial advisor. This agreement should offer compensation sufficient to cover the promissory note costs and the expenses associated with purchasing the practice of the incapacitated advisor. Mutual insurance among advisors can further secure practices and client well-being. 

Navigating the Transition Process: 

Have questions about the transition process? 3xEquity is here to guide you from curiosity to completion. Secure multiple offers while remaining 100% anonymous—get started [here].