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. But not all of those whose lives have been turned upside down are wealthy; many are facing substantial losses and will have decisions to make about the best way to move forward.
Financial advisors who engage in pro-bono planning hope to help, and several are mobilizing efforts to provide financial guidance. It’s a slow start, as many victims are still dealing with more immediate needs, like housing, gathering basic supplies and accessing government aid. But the need for good financial advice will be acute for many, likely for a long-time to come.
“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, which burned almost 100,000 acres and over 1,500 structures over two weeks, and forced the evacuation of almost 300,000 people; following that fire, pro bono financial workshops did not emerge until January 2020; that’s how long it took for homeowners to find out what their insurance would, and wouldn’t, cover.
The FPA chapter will coordinate similar pro bono workshops for the current disaster. Rugg said the association is 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 have signed on to volunteer, most of them financial planners. The chapter is reaching out to elected officials to raise awareness of the database.
Unlike the insurance delays experienced in 2018, some clients quickly received their proceeds from recently purchased, expensive policies with good coverage. That’s not the case for most.
“There is a huge gap,” she said. For those who have owned their homes for several years, “I 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 sky-high cost of construction that insurance companies haven’t taken 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 a family is in the program, Rugg said an advisor can look at their assets and cash flow, and help with the financial decision of whether to rebuild.
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 (an insurance program in the state for homeowners unable to get a fire-protection policy from traditional carriers) 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.”
Many families won’t come back to their communities because rebuilding may take three to five years, 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 volunteer work, so when the fires hit Los Angeles, she thought it would be more impactful to leverage her financial planning experience. A couple of families have reached out to her for pro-bono planning, and she expects to work with them on a case-by-case basis depending on their personal financial situations, taking into consideration their debt, cash flow and the stability of their jobs.
Those families found Patterson via Breanna Rae Blaney, a yoga teacher and vice president at Dimensional Fund Advisors where she helped develop the Life, Invested platform with founder David Booth to broaden how people think about the values they bring to their investments. Rae Blaney is based in Marina Del Rey, Calif., and had built a large network of financial advisors during her time at Dimensional. She built a directory connecting people impacted by the LA fires with financial professionals and emotional support practitioners offering pro bono services.
“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 these advisors together and host educational events in Altadena, a lower-income Los Angeles neighborhood heavily impacted by the fires, in February and March.
She said it has been a slow process to coordinate the financial planning experts to get the pro bono efforts underway, but there is some urgency in Altadena and similar communities. Many owners in those areas are already getting offers on their properties and need advice to help them with the decision.
“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
LA Fire Relief
Resources to Help Clients:
UpHelp.org for Insurance Help
After the Fire
