Advisors rush to reach clients affected by LA fires

Fires burned roughly 27,000 acres in and around Los Angeles and were virtually uncontained as of Wednesday afternoon, leaving thousands of people waiting to hear about the fates of their homes.

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Half a dozen fires left paths of destruction, killing at least five people and claiming a quickly rising number of houses and businesses. Thousands of people have fled.

Financial advisors in the area scrambled to reach clients who were at risk. And some themselves were forced to evacuate.

“This fire came into areas of the Palisades that would never have thought themselves threatened,” said Adam Scott, founder and principal of Santa Monica-based WellAcre Global Wealth Advisors. Scott, whose home is in Topanga Canyon, had to evacuate with his family on Tuesday and is staying with friends. He has clients who have similarly had to leave their homes due to the Palisades fire, but many who are in other places in the LA area have offered him shelter, he said.

“Obviously it’s alarming because you don’t know if you’re going to see your house again,” he said. “All my clients are offering me places to stay. They’re more concerned about me.”

Extremely powerful Santa Ana winds, combined with dry conditions and abundant fuel sources, have caused fires to spread far beyond wilderness areas that tend to be at the highest risk of wildfires. Landmarks like schools and restaurants have burned down, and it could take more than a day for evacuees to verify whether their homes remain standing.

“I’ve got clients who have lost their homes. I’m OK, but others are not,” said Daniel Scott Johnson, founder of Windfall Advisors, whose office is in Santa Monica. “There are mass power outages to prevent further sparks and downed lines. There are ongoing fires – a new smaller one along [the Pacific Coast Highway] in Malibu. There are homes still burning in the Palisades. The winds were supposed to calm down today, but there are no signs of them calming down.”

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Firefighters have prioritized search and rescue operations, leaving few resources to attempt to extinguish blazes that have consumed homes on a scale the city has never seen.

A couple in their 80s who are Johnson’s clients had their home in the Palisades destroyed after living there for most of their lives, he said.

By midday Tuesday, he was able to reach all his clients who were in evacuation zones, he said.

“Right now, it’s coming down to basic needs, making sure people are safe,” he said. “There are fires going on everywhere that are not contained.”

The Palisades Fire is currently the largest active one, having spread through about 16,000 acres, according to the state. The Pacific Palisades neighborhood is home to numerous celebrities, and home values there extend into the tens of millions of dollars. B. Riley Financial founder Bryant Riley also reportedly has a home there.

“The hardest part is that the community just doesn’t know if their houses are still standing – but it appears that a good part of the Palisades is gone,” said Jamie Rugg, vice president of wealth management at Highline Wealth Partners. “We are used to fires in this area, and none of us can recall having one that is this close to the center of the city. For the friends and clients who we are pretty sure have lost their homes, they are devastated and reeling. They have no idea what they’re walking back into.”

An immediate challenge for people affected is finding shelter, as hotels are filling up, she said. A client couple that had left their house for an appointment couldn’t return after the fire to retrieve anything, she said.

The long-term problem of rebuilding will be complicated and difficult. The 2018 Woolsey Fire, which burned about 97,000 acres, is evidence of that – as many people couldn’t find out for about a year what their insurance would cover, Rugg said. In the wake of that, advisors held events to help guide residents through the insurance claims process, said Rugg, who is director of pro bono at the Financial Planning Association’s Los Angeles chapter. Most found out they were underinsured, she said. A lesson from the city’s history with fires has been to have important documents, including insurance contract, available and backed up in the cloud, she said.

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Already, property insurance is problematic for Californians in high-risk fire areas, attributable to the high cost and limitations of coverage. Some, including homeowners in the Palisades, have had to turn to the insurer of last resort, California’s FAIR Plan.

“A lot of carriers have pulled out of California and have stopped doing business. I worry for people who don’t have coverage or have not renewed,” said Jeff DeLarme, president of Palos Verdes Estates-based DeLarme Wealth Management. “For folks who do have coverage, it’s going to be an arduous process.”

It will be devasting financially for many, but state and federal aid, if offered, could help, he said.

“It’s apocalyptic. You just never expect this, even in Southern California,” he said. “This is one of the driest years on record. It’s just a really bad situation.”

Scott, whose family had recently listed their home for sale, has worried about the fire risk and complications of rebuilding before.

Insurance might cover the cost of rebuilding a structure, but that doesn’t necessarily mean that it can easily be done, he said. Some older homes, for example, were constructed before stricter permitting standards for things like septic system drainage requirements.

If a house can’t be rebuilt, that can mean getting an insurance check that is far lower than the total value of house before it was destroyed, leaving someone with a burned plot that could be difficult to sell, he said. Add mortgage debt to that, and the financial consequences are even higher.

“These fires are just catastrophic,” he said. “If you can’t rebuild in Malibu that plot with fantastic views overlooking the ocean … it’s worthless. I think that’s something people don’t realize.”