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Financial Planning That Helps Clients Weather Disasters
• Joe Buhrmann • December 6, 2022
Billion-dollar disasters, inflation, and increased building costs mean a perfect storm is brewing for financial planners’ risk management strategies.
If the next natural disaster comes for your clients, will they be ready?
Insurance in Financial Planning
The CFP® Board includes risk management and insurance in its financial planning principal knowledge topics for a good reason. Insurance offers a layer of protection for your assets and can help preserve your income. Our research shows about 70 percent of advisors offer risk management and insurance planning.1
However, there is a disconnect. The vast majority (87 percent) of high-net-worth people see tangible assets as part of their wealth. That includes art, boats, planes, collectibles, real estate, and businesses. The problem is, only 53 percent of advisors share that view, according to a study conducted in partnership with The Wharton School.2
There’s more bad news. By some estimates, two-thirds of homes in the U.S. are underinsured.3 If that many houses are without proper coverage, it’s likely many of clients’ other valuables are as well.
Financial and Physical Well-Being
Helping your clients prepare for disasters goes beyond preserving wealth, however—it’s really about their health. If you’ve prompted your clients to think ahead about evacuation planning, a home inventory, and a plan for documents, then they’ll be more likely to get out of harm’s way when necessary.
Here are three tips to help your clients follow the Scout motto and be prepared.
#1 A Virtual Go-Bag and More to Guard Documents
For holistic financial planners, offering a secure digital vault where clients can store their important documents is table stakes. After all, if your services include coordination with their estate planning, insurance, and more, you need to have a secure way they can share that data with you. The Federal Emergency Management Agency has a comprehensive list your clients may find useful in deciding what to put in their vault.
When an emergency does happen, this client vault becomes a virtual go-bag that can help clients manage their financial life from wherever they are. They can check their homeowner’s insurance coverage before making a claim once the storm has passed. They can also conduct any important business knowing they have their paperwork in the cloud.
Some clients can stubbornly refuse to go digital, clinging to their file cabinets. Well, you’ve probably heard of advisors organizing a “shred day” for their clients. Why not hold a “scan day” and have clients get their paperwork organized in one place and ready in case disaster strikes?
One last note on paperwork. Sometimes you need the physical, notarized copy of a document. Encourage your clients to keep their wills, birth and marriage certificates, passports, and the like in a fireproof, waterproof box that they can take with them when they evacuate. While they’re at it, have them think about what priceless personal items they would want to take with them as well.
#2 Designing a Moat with Insurance Analysis
With inflation and building cost increases, now is the time to examine property and casualty insurance to identify gaps in coverage. A majority of insured homeowners (63 percent) haven’t added annual inflation adjustment coverage to prevent being underinsured. And 60 percent of homeowners who renovated during the pandemic didn’t update their home insurance to account for the remodeling.2 Your client’s home is their castle, so it’s good to make sure there is a moat to protect against the worst-case scenario.
Don’t forget about the contents of those properties. Do your clients have replacement cost of contents in their coverage?
Additionally, a quarter of homeowners say they’ve never made a home inventory.2 Sharing resources to help clients complete a home inventory ahead of an emergency can help make sure they have proof of their valuables to provide peace of mind.
#3 Calming Nerves with Proactive Outreach
Anticipating people’s needs really does elevate the client experience. This means knowing your clients and the risks they face and communicating when there’s an active threat.
An email or call to a client as wildfires burn near them or a hurricane approaches can put them at ease. They’ll know they can access their money if needed and someone is looking out for their interests.
Some advisors, especially those with local clientele, go the extra mile by creating a list of trusted vendors for things like snow removal and storm shutter installation. Sharing that list of resources can offer a bit of calm to someone stressed out by an impending disaster.
Ready for Anything
You’ve prepared your clients for the rainy days of life. But have you prepared them for the financial whirlwind that is the end of life?
Help get your clients’ affairs in order with our new eBook, Candid Conversations: Estate Planning. Read it and you’ll find practical techniques and tactics that apply financial psychology to estate planning.
1. eMoney Leading with Planning Research, May 2022, Advisors n=360.
2. Chubb. “Chubb and Wharton Study Examines Ultra-High-Net-Worth Individuals’ Preferences on Financial Advising and Investment Management,” December 21, 2021.
3. American Property Casualty Insurance Association. “New Survey Finds Majority of Insured Homeowners at Risk of Being Underinsured Amid High Inflation & Increased Building Costs,” May 6, 2022.
DISCLAIMER: The eMoney Advisor Blog is meant as an educational and informative resource for financial professionals and individuals alike. It is not meant to be, and should not be taken as financial, legal, tax or other professional advice. Those seeking professional advice may do so by consulting with a professional advisor. eMoney Advisor will not be liable for any actions you may take based on the content of this blog.
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