As life returns to normal following the devastating Los Angeles wildfires last month, the work is just beginning for financial advisors. 

From securing temporary housing, setting up P.O. boxes and filing insurance claims, advisors are helping clients weather immediate needs while staying the course toward retirement. It’s a difficult balancing act that requires making significant portfolio changes in the short term, and updating financial plans for the future. “You never plan to have your house burned to the ground,” said Katy Song, a CFP and chief financial planner at Domain Money, who works with impacted clients as well as families that lost homes during the Tubbs Fire near Santa Rosa, California, in 2017. She said it took them the better part of three years to get back on their feet.

“The most important thing is to find a place where you can live, where you can think, and where you can just breathe,” she told The Daily Upside. “Because you’ve got some really big decisions to make.”

Trial by Fire

While it’s hard to imagine the impact of the fires that destroyed more than 18,000 homes and buildings, the most pressing concern for clients is often cash flow, said David Askew, a CFP and managing director with Mercer Advisors. He works with about a dozen clients who were permanently or temporarily dislocated and are now facing new costs of rental homes on top of monthly mortgages. Likewise, car payments are due for damaged vehicles, while clients pay for rentals, and it could be months before insurance benefits kick in.

“Clients were focused on tax efficiency and appreciation pre-fire,” Askew said. “Now, it’s much more about income.” His firm pivoted his high-net-worth clients to more dividend-focused approaches that pay out monthly, or private investments, like real estate investment trust, or oil and gas partnerships that offer cash distributions. 

A useful exercise for more affluent clientele is to map out a client’s full balance sheet, Song said. Check out all possible avenues for additional income, like reasonably priced lines of credit, or disaster-relief early distributions from 401(k) accounts. Clients may even be able to take out loans of up to $50,000 against retirement accounts, and although clients will have to pay interest, they’re essentially paying it back to themselves, she said.

Human Resources. To help, Mercer launched a microsite with important information for impacted clients, like how to get new copies of marriage or birth certificates, or documents that break down county tax codes, Askew said. Hundreds of people have accessed the site and about two dozen folks reached out for pro-bono planning. 

Simply listening to clients also goes a long way to ease their fears and help them keep their eyes on the future, Song said. “Getting through this trauma helps build a better relationship,” she said. “Sometimes, people are just looking for an empathetic hug.”

Call in the reinforcements.

The wealth management industry is facing an upcoming advisor shortage, and it could be worse than first expected. While the workforce has grown 0.3% annually over the past decade, it’s projected to sink 0.2% per year moving forward, according to a McKinsey & Co. report this week. As retirements outpace the number of new recruits, the industry could dwindle by 100,000 advisors come 2034. That could leave thousands of Americans without proper financial planning, even as the number of wealthy households ticks up and investors become more willing to pay for financial advice. 

“Advisor headcount is projected to go down, and that was not the case before,” said McKinsey associate partner Vlad Golyk. “The industry finds itself at a point where it needs to act now.” 

Supply and Demand

The problem is that 110,000 advisors — around 38% of the workforce managing 42% of industry assets — are expected to retire in the next decade. To fill those seats, the industry would need to bring in 30,000 to 80,000 new advisors over the next 10 years. Just 8,000 have joined over the past decade.

But it’s not all doom and gloom. The number of households with at least $500,000 in investable assets will increase by as much as 5% per year through 2034, according to the report. The research also found clients are willing to pay top dollar for advice:

• The share of investors seeking more than just portfolio management, like tax and estate planning, grew to 52% in 2023 up from just 29% in 2018. 
• Nearly 80% of wealthy households would pay a premium of 50 basis points or more for human advice rather than low-cost robo-advisors, per McKinsey. 

“You’re going to have fewer advisors, more of them are going to be older, and productivity gains will be smaller,” Golyk told The Daily Upside. 

Requesting Backup. Though the industry is hiring younger talent, training programs often have high dropout rates, Golyk said. A big issue is that the industry doesn’t offer the mouth-watering salaries that appeal to recent college graduates, who often gravitate toward jobs in investment banking or on trading desks instead. The sales-based commission model can also be a turnoff.

Firms stand to benefit from reevaluating the role of an advisor, especially as clients look for services beyond just portfolio management. “Think of it more like a financial coach, and you’ll attract a broader set of creative ideas and talent,” Golyk said.

Thousands of altcoins are just waiting for the light to turn green. 

The Securities and Exchange Commission has received at least a dozen requests from issuers looking to launch funds that track so-called altcoins that have smaller market caps and generally much larger price swings. If any get the OK, it could pave the way for funds that hold everything from Tether, DOGE, and even (sigh) Fartcoins.

The funds aren’t expected to be a game changer for crypto-first clients, but they could offer diversification in a broader bitcoin portfolio, or at the very least, open up an easy avenue for them to dabble in the growing world of altcoins.

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