Predicting The Unpredictable
For others, though, the hurricane was a wake-up call.
“Hurricane Ian is another shot of pain in a tough year for investors,” said Brian Frank of Frank Capital in Key Biscayne, Fla. Survivors, he said, will not only have to deal with clearing away the aftermath of 10 feet or more of water but also face months or years of hassling with insurance companies and contractors as they hope to rebuild.
“Clients of our firm are fortunate enough to have had large cash balances and short-duration fixed income to draw upon,” he said, but that is “small consolation.” His firm, he explained, has a “strict valuation discipline” that he credits with helping keep clients out of risky securities.
In the wake of the disaster, Frank turned somewhat philosophical. “Events like Hurricane Ian remind us all that risk is unpredictable and happens fast,” he said. “Those who follow a value strategy [as opposed to a more aggressive growth strategy] are able to face tough events like bear markets and hurricanes.”
While risk management is done on a client-by-client basis, Ehrlich said he has a rule of thumb for “cash in the house”: 60 days’ worth of expenses.
Ehrlich said because his firm is fee-based, comprehensive financial planning includes helping clients with maximizing insurance, finding insurance adjusters and accessing money in their accounts they might need. “Everything we do as a firm is downside protection, so we build a lot of safety features into portfolios,” he said, including investments like structured notes that generate income when stocks are down so that even when tough times are made tougher, he can deliver good news.
How long Ehrlich’s clients will have to wait to be made whole will depend on utility companies, adjusters and contractors, he said. In the meantime, making sure his clients know he’s watching out for them financially provides them with some peace of mind. Luckily, he said, he has only a few clients who were in the path of Ian. But the advice he and other advisors have under these circumstances would apply to communities dealing with floods, tornadoes and wildfires.
Facing Down Challenges
Curtis H. Parry Jr., founder and CEO of RIA Unique Wealth, an RIA with offices in Tampa and Clearwater, Fla., said, “Florida was already having challenges with homeowner's insurance prior to Hurricane Ian,” meaning that the frequency of major storms makes many properties uninsurable. “Federal and state financial assistance will be greatly appreciated.”
Buildings in Tampa survived mostly unscathed, he noted, though most homes were still without power.
Like Thompson at Peach Insurance, Parry reached out to clients before the hurricane touched ground—just to see if they needed help with sandbags, boarding up their windows, or other preparations. After the hurricane passed, many clients called back to “ask if we're all right,” he said. “Clients are genuinely concerned for our well-being.”