In early January, a series of wildfires raged unabated across the Los Angeles region, killing at least 29 people and destroying more than 16,000 homes and buildings, primarily in the Palisades and Altadena neighborhoods. Some people are now facing seven- to eight-figure losses in real estate alone, and many of them do not have a financial advisor to help navigate the situation.
The pro bono community hopes to change that, and several advisors are mobilizing efforts to provide free financial guidance to those affected by the wildfires. But it’s a slow effort. Victims are just coming out of a period of acute need, including arranging housing, supplies and government support.
“Now we’re starting to get into the parts where the focus really is on their insurance policies, what to look for, what do we need to know? How do we actually start the claim process?” said Jamie Rugg, vice president at Highline Wealth Partners, who co-leads the pro bono program for the Los Angeles chapter of the Financial Planning Association. “We know the need is going to be long-standing, and it’s going to be immense. This is going to take a couple of years.”
Rugg cited the Woolsey Fire in November 2018; following that fire, there were no pro bono workshops until January 2020 because that’s how long it took for homeowners to find out what their insurance would cover.
The FPA chapter will coordinate similar pro bono workshops, but right now, Rugg said they casting a wide net and creating a database of financial planners, insurance agents and real estate professionals who have offered to help. So far, 42 professionals have signed on to volunteer, most of them financial planners. The chapter is also reaching out to elected officials in the Los Angeles area to raise awareness of the database.
Unlike with the Woolsey fire, said she’s already seen some clients receive their entire insurance proceeds, often with policies purchased recently. But those were expensive policies with good coverage. Many folks, however, are underinsured.
“There is a huge gap,” she said. “If someone had their house 8, 9, 10 plus years on, I can very strongly suspect the majority of them are underinsured because the home values have risen so much and the policies haven’t kept up.”
It’s the cost of construction that insurance companies don’t take seriously, added Laurie Dubchansky, founder and CEO of Havaplan Financial and head of Orange County FPA’s pro bono program.
“We look at insurance policies all the time, and they’re insured for like $300 a square foot,” she said. “You can’t build anything for $300 a square foot in Southern California. Part of our job is, what will it cost you to rebuild? Is it $600 a square foot, and you’re insured for $400? That’s the trick is, knowing the real cost to rebuild and what’s the gap.”
While Rugg’s program will be in-person, Dubchansky’s is completely virtual. She has about 18 CFPs who provide about 40 hours a week of pro bono offerings either on Zoom or via telephone.
Once the family is further along with the process, Rugg said an advisor can help with the financial decision of whether to rebuild, looking at all their assets and cash flow.
There’s a misconception, particularly with the Pacific Palisades, that the fires affected the highly wealthy, Rugg said.
“That’s not the case,” she said. “There are families we know that have been there for 40, 50, 60 years. One of my clients, they’re not rebuilding. They were only able to get the California FAIR Plan from the get-go when they bought their house in the ’80s. They know there’s no way, and they’re not going to be rebuilding.”
“A lot of these people in these burn areas are just not going to come back to their communities because the reality is, in the Palisades, you had people that have families, your house is going to take three to five years to rebuild,” said Sathya Chey Patterson, a managing partner and wealth advisor with Arise Private Wealth in Rolling Hills Estates, Calif. “Your kid is in another school. They’re going to get ingrained and build a community there. They’re probably not going to come back. You’re going to have all these private equity people buying up the land. They have the resources and the time horizon to wait for a community to be rebuilt.”
Chey Patterson has a passion for volunteering. But when the fires hit Los Angeles, she thought it would be more impactful to leverage her financial planning experience. She has had a couple of families reach out for pro bono advice and expects to work with them on a case-by-case basis, looking at their personal financial situations. But in general, she expects to go over how much debt they have, their cash flow and the stability of their jobs.
Patterson connected with those families via Breanna Rae Blaney, a yoga teacher and former life, invested director and vice president at Dimensional Fund Advisors. Rae Blaney, who’s based in Marina Del Rey, Calif., had built a huge network of financial advisors during her time at Dimensional, and she wanted to use that network to help fire victims. She has built a directory connecting people impacted by the LA fires with financial professionals and emotional support practitioners offering pro bono services, although she says it’s still in the early stages.
“I think our biggest challenge is just getting it in the hands of people who actually need it,” she said. “It’s great to have something like this, but I don’t think there’s a lot of awareness, particularly in lower-income communities, around what a financial advisor can do for someone.”
Rae Blaney hopes to get a panel of advisors together to provide education at upcoming events in Altadena in February and March.
She agreed it has been a slow process to gather financial planning experts and get pro bono efforts underway in Los Angeles. But there is some urgency, particularly in Altadena and the lower-income communities. Many people in these areas are already getting offers on their properties and need advice to help them with this financial decision-making.
While it’s still early in the process, she hopes to participate in some of the local events being organized in the next month or two.
“I think that there’s a big opportunity to make an impact there,” she said. “But I think it does require getting boots on the ground a little bit and getting into the communities. That’s the next step, is how do we get our hands in the dirt and go talk to people and start to evolve our solutions to actually be supportive for them?”
Los Angeles Wildfires Resources
Interested in Volunteering?
Volunteer Via the Los Angeles Chapter of the Financial Planning Association
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