As the Marshall fire raged through Boulder County, Colorado, on Dec. 30, Edward Jones financial advisor Sonia McCloskey and her husband fled their home under pre-evacuation orders. If they waited, they were told, they could be trapped.
“I’m so thankful for the first responders, the marshal and the fire department,” says Sonia, who co-runs the Edward Jones branch in Arvada with partner Matthew Jewett. “I was in shock.”
She’s also thankful that her husband, a veteran of the U.S. armed forces, was ready, focused and helping their neighbors. “You think that you are prepared, but it takes a long time,” she says.
Wind gusts exceeding 100 mph rapidly spread the grass-fueled urban firestorm. As the McCloskeys hunkered down in a hotel with other evacuees and watched the news, they realized they had a 50-50 chance of losing their home. It was spared when the winds shifted again. But the fire destroyed more than 1,000 homes and businesses and damaged many others. Some subdivisions in nearby Louisville and Superior, the hardest hit municipalities, were largely reduced to ashes.
Immediately upon returning home the next day, McCloskey began calling her financial planning clients and companies for whom she manages 401(k) plans. The conversations included, “How are you guys? Were you affected? Do you know anybody that was affected? If yes, did they lose their home? OK, they need to call their insurance company; here’s the number,” she says.
The road to recovery will be long and difficult. Some people lost their homes and businesses, she says, and the pandemic makes displacement extra hard. An already tight housing market presents another challenge. Colorado is also well poised for future natural disasters.
Wildfires are common in this heavily forested region of the state, severe flooding devastated the town of Lyons in Boulder County, and “the other side of our hill is where Tornado Alley starts, towards Kansas,” says McCloskey. “So, I always tell people, there is a reason why you have an emergency bucket.”
Wide swaths of the country experienced Mother Nature’s wrath in the final days of 2021. On December 10, more than 60 tornadoes tore through eight states (Kentucky, Arkansas, Tennessee, Missouri, Illinois, Georgia, Ohio and Indiana), killing at least 90 people and racking up an estimated $18 billion in damages. Less than a week later, tornadoes hit Minnesota and Wisconsin.
According to a news article from the National Oceanic and Atmospheric Administration (NOAA), “Attributing a specific tornado to the effects of climate change remains challenging. However, we can say that warmer winter temperatures attributed to climate change are projected to create conditions that make tornadoes more likely.”
Scientists say climate change, including warmer sea-surface temperatures, is also likely responsible for the growing intensity of hurricanes. Hurricane Ida, the most expensive U.S. disaster in 2021, caused an estimated $65 billion in damages. After making landfall in Louisiana [on the 16th anniversary of Hurricane Katrina], it barreled northeast and flooded Philadelphia, many towns in New Jersey and New York City.
Last summer, severe droughts contributed to catastrophic wildfires in Oregon and Northern California, a problem that’s become more rampant in the western part of the U.S.
Advisors throughout the country are stepping up disaster-planning efforts for themselves and their clients.
Preparing for the Unexpected
For McCloskey, it’s never been just about planning for retirement. “We need to do more than just advise clients what mutual fund to buy so they can retire,” she says. “We need to go above and beyond to empower them.” She asks them, “Besides retirement, what do you want to do? What is your purpose?” and prepares them for life’s unexpected curveballs.
She reviews their insurance coverage, keeps their agents’ contact info on file, and asks clients what they’d like her to do and whom she should call in the event of a disaster. This information is stored on Edward Jones’ system so it’s accessible through the St. Louis home office even if her office suffers damage. When there are wildfires, Edward Jones’ corporate human resources department calls her cell phone to ask if she and her team are safe.
Staying in touch has always been important to McCloskey, who grew up in Spain and whose family still lives there. Her father taught her and her sisters to always maintain a phone tree. And it was her phone-tree contacts who helped her board a plane to Europe just four hours after her father suffered his first heart attack and was hospitalized. Her sisters called her assistant at the office, who called McCloskey’s husband, who got her luggage ready.
“We talk to the clients the same way,” says McCloskey. “We tell them, ‘We are here to help you.’”
Picking Up the Pieces
“When you get a pre-evacuation order, they tell you, ‘Get your medication, get your pets and you get a list of things they tell you to take. But again, believe me, you’re not thinking OK,” says McCloskey. In the aftermath, some people may not have their bank cards and credit cards, she says, nor know the 1-800 numbers to call.
“What I have noticed in the past is that even if they know what to do, they may need someone to tell them.” She reminds people impacted by natural disasters to keep their receipts because they may be reimbursed.
A client who owns a farm had to move her horses because of the fire. When McCloskey called to ask how she and her husband could help, the client reminded her that she’s financially OK because of the emergency bucket McCloskey helped her set up.
The industry rule of thumb is six months of expenses in an emergency bucket, but “I’m a believer that you need 12 months,” says McCloskey. For example, you may need this money to stay in a hotel for weeks or months. Even if an insurance claim is approved, you may not start receiving the money until the next month, she says.
Must homeowners continue to pay their mortgage if their house is totally destroyed? It depends on who holds the mortgage, an agent told her. Those looking to rebuild also have to be patient. “Think about building a house and then add an insurance layer to that,” says McCloskey.
The pandemic-induced labor and lumber shortages can also delay insurance-company approvals, building permits and construction, she says. The volume of structures needing repair and rebuilding from the Marshall fire will also present supply-demand challenges.
First Steps and Older Clients
When disaster strikes, clients should be reminded to first check with their insurance companies and to register with FEMA, says McCloskey. She also encourages people to call their employers to ask what resources they may have available. Oracle and Walmart, two big employers in the Boulder area, are offering resources for those impacted by the fire, she says.
McCloskey periodically reviews home insurance coverage with clients, including retirees who’ve paid off their mortgages. She tells them, “Property costs have gone really high – do we have enough to cover just even your structure?”
She also checks if clients’ life insurance, long-term care insurance, wills and trusts are in order. This includes confirming with them that their beneficiaries are correct.
“Think about if there is a tornado: How many people get hurt? How many people get hit by a piece of wood? Or ‘I’m almost at retirement and I got into a car accident because I was running too fast out of the neighborhood, and now I’m paralyzed,’” she says. “These things in my head come all the time because that’s my job. I need to be ready for the ‘what ifs’ for the client.”
An Escape Plan and More
Like many Floridians, Glenn J. Downing, CFP, a co-founder and principal of the Miami-based independent RIA firm CameronDowning, has hurricanes on his mind from June through November.
“The good thing about a hurricane, as opposed to a fire or tornado, is that we have some warning — usually several days.” He says that any client, of any age, needs to have a hurricane plan that includes stocking up on necessities and an escape plan.
“For all types of perils, clients need to know what their insurance covers and what it doesn’t, and what the deductibles are,” says Downing. It’s a good idea, he says, to personally review policies with agents at least every other year; he does this as part of comprehensive financial planning. Insurance should cover the replacement cost of a home, he says, “and with building materials and labor having risen so rapidly lately, this is a common deficiency.”
Client with a strong emergency fund can take on a higher deductible and reduce out-of-pocket premiums, Downing adds.
Clients should also store documents electronically so they can be accessed if there is a disaster. “A Dropbox folder works great for this,” he says. “And finally, cash is always king. Not a bad idea to keep at least $1,000 cash on hand in case of a power loss that extends for days.”
Downing grew up in Connecticut and lived in New Haven during Hurricane Gloria. “What a storm! Massive trees in the park a block away were strewn about like toothpicks. Never seen anything like it,” he says, still grateful he didn’t lose power like many others. “We opened our apartment to all friends for showers and hot meals. I’ll never forget it.”
Have clients suffered hurricane losses that impacted their retirement readiness or required them to make any changes? “Can’t think of any client examples for certain, but friends, yes,” he says. “But I’ll tell you, people in Miami tend to reckon time pre- and post-Hurricane Andrew.” It made landfall in South Florida as a Category 5 storm in 1992, before he lived there.
Downing’s clients haven’t abandoned South Florida because of the hurricane risk. They’re more likely to sell here and move to Central or North Florida to “buy a bigger home, and pocket a hundred thousand or two in the process,” says Downing. However, “I do have one client who sold a waterfront property and moved upstate primarily because of a great offer but secondarily because of a concern about sea-level rise.”
Michelle Rand, founder and CEO of Cascade Investment Advisors in Oregon City, Oregon, has been through a couple of serious natural disasters in the last year or so. One was the February 2021 ice storm (Portland’s worst in 40 years) that knocked out electricity in the region for up to two weeks, and longer for some. Then there were the wildfires that threatened Portland.
One of her clients didn’t like the winter or fire danger up in the Columbia Gorge so she moved for this and other reasons, says Rand, who mostly listened to the client’s reasoning. “Now that she has sold her place, we are investing the net money generated after she bought a new home in downtown Portland,” she says.
Another client, who owns many acres of timber, was impacted by the fires. “I told him several times over the years to get it thinned. Well, he never did, and he basically lost a few hundred thousand dollars in timber value,” says Rand. “He said, ‘I shoulda.’”
Rand has a few clients who are moving to or are thinking about moving to Bend, Oregon, where she thinks water issues will be acute in the next decade. “I try to make them see that, but they want to move anyhow, isn’t anything I can do about that,” she says. “I recommend rain barrels and cisterns, that’s about it.”
Supporting a Community
Back in the Boulder area, where snow has delayed the recovery process, McCloskey is reaching out to assist her community.
“With Edward Jones, we partner for a positive impact always. My goal, coming from another country, being an immigrant, is that I just want to improve the lives of our clients and colleagues. And together, we can better our communities and society,” she says.
McCloskey’s office has teamed up with the nonprofit A Precious Child, based in Broomfield, Colorado, by collecting toys, teddy bears, blankets, clothing, sporting equipment, electronics, hygiene items, towels and packs of underwear and socks for children. Her office is accepting drop-offs through January. (See contact info at the bottom of this article.)
The head of A Precious Child told her, “People are in shock, they don’t know what do, they just are very lost,” says McCloskey, who is figuring out how to find them support.
In a recent LinkedIn post, McCloskey wrote, “I see the Colorado spirit in full motion. Neighbors helping neighbors, families getting closer, strangers showing up to help with any kind of need.”
Unfortunately, natural disasters can also bring out the worst in people. We asked McCloskey how victims of natural disasters and those who wish to support them can avoid getting scammed.
Work with your county, municipality and FEMA and “don’t just go to the internet,” she says. “Right after we got in the house, 24 hours later, I got an email from somebody saying, ‘We see that you have been affected in the fires. You can apply in this place …’ And my husband, he’s a cybersecurity expert, said, ‘Nope, that’s a scam.’”
She encourages people afflicted by natural disasters to go to the places the government and evacuation teams are suggesting and to talk to the people there. In addition, she advises people to work with their professionals, including insurance agents and financial advisors.
“When you are the victim, you don’t feel that people are working fast enough for you, so you are going to be looking for resources,” she says. But if you act impulsively, you’re more likely to “make a mistake and become a victim of fraud or a victim of a scam,” she says. “We’re here to keep you calm and patient.”
Donors should stick with credible organizations. Community Foundation Boulder County has set up the Boulder County Wildfire Fund, she notes.
Days after the fire, McCloskey is still processing that she was luckier than many friends, neighbors and other county residents. “Right now, I wonder, ‘Why am I still standing and their houses are not?’” she said. “My husband says, ‘You were given a chance so you can do better for others.’”
Jerilyn Klein is editorial director of Rethinking65.
To donate items to A Precious Child, feel free to call Sonia McCloskey’s office at 303-456-0282. Packages can also be sent to Edward Jones, 6472 Ward Road, Arvada, Colo., 80004. Edward Jones cannot accept cash, checks or gift cards.