Bob Reed considers himself one of the lucky ones. When Hurricane Katrina took its unexpected final turn toward the Gulf Coast, the Covington, Louisiana, financial planner evacuated his family, packed up his office computer, and headed for Tuscaloosa, Alabama.
Even with his assistant in Arkansas, his junior planner called up to serve in the National Guard, and his clients spread all over the South, surprisingly, he didn’t have much trouble setting up shop in his brother’s house. His client files were on his hard drive, he reached most of his clients by phone, and since both his back office and compliance functions long ago had been electronically outsourced to other regions of the country, he was able to start working with his clients as soon as they were ready to work with him.
Reed moved back to Covington (a suburb across Lake Pontchartrain from New Orleans) when power was restored a week after Katrina made landfall, leaving his wife and school-age children back in Tuscaloosa. He was relieved to find his house and his office relatively unscathed. Three days later, he was able to get back on the Internet, and get back fully to work. So far, he says, his clients have been “quiet.” Their concerns have been finding new cars, filing insurance claims, and of course, managing their cash flow.
Yet, with everything seemingly under control at the moment, Reed is far from sanguine with his current situation. When asked what help he needs, he refers to a recently written five-year plan that is now as much in shambles as the city of New Orleans itself, and said he asked his management consultant, Angie Herbers, to come on down and help him sort out his scattered staff and what he sees as his three options: revamp his existing plan to expand into Baton Rouge and New Orleans, focusing only on the former; sit tight in Covington until he can see the future a little more clearly; or relocate to another city altogether, possibly back to Tuscaloosa.
In the wake of any disaster, uncertainty about the future is one of the most uncomfortable feelings all business owners and their employees can have.
The devastation and aftermath of Hurricane Katrina (much of which we have not even begun to comprehend) has created a level of uncertainty about the future of most if not all of the 3,000 or so (by my estimate) independent financial planning practices in the region. Many business owners, not just financial planners, have lost their offices, homes, likely some family members and clients, and their very livelihood.
Support for Independents
While we have yet to discover the ultimate impact, one thing is certain: When rebuilding a dream that right now seems to have been destroyed, the decisions that are made in the process will be the determining factor in these business owners’ ability to thrive along the rough road ahead–and this is the very support that the rest of the financial planning community can and must provide them if independent advice is to prove truly as viable as being a captive broker at a wirehouse. For as the images of New Orleans underwater, and thousands of hungry, thirsty, and victimized people in the Convention Center start to recede from our minds, and the country is left to sort out how such a disaster could have been handled better, and who is to blame that it wasn’t handled better, the financial planning community is left to face the reality of what it gave up to have independent practices.
Once the life-threatening emergency seemed to be behind them, most independent planners naturally turned to their broker/dealers or custodians for support: an office in which to set up shop, computers, phone lines, and client data files. Most independent B/Ds rose to the challenge, finding firms that were in nearby but unaffected areas to provide office space and technology. Schwab, which only had a few of its 5,700 or so affiliated advisors displaced, opened the doors of its retail center in Houston to accommodate them. Most important, the brokerage firms served as centers for clients to find their advisors and vice versa–the first professional call most advisors made was to their B/Ds to tell them where they were, and when displaced clients called in, the circle was completed.
Yet, after a few days of exchanging e-mail with advisors who had been displaced by Katrina or who were relatively unaffected in stricken areas (one lesson from this crisis is that the Internet has proven a whole lot more reliable than the phone system), it became clear that as in Bob Reed’s case, advisors used their technology to get back up and running fairly quickly and easily.
The real challenge will be helping these advisors rebuild their businesses. I must admit that I didn’t get a total warm and fuzzy after I heard that, when asked, a number of B/D executives replied that no, they didn’t actually have a legal obligation to help their advisors, because after all, they are independent contractors. But, they added less than reassuringly, they certainly would help as much as they could.