Five steps to prepare clients to navigate the tragic and unexpected

Devastating hurricanes in North Carolina and wildfires in southern California have become a stark reminder of how quickly disaster can strike – wreaking havoc on homes, businesses, and lives. While we can’t predict when or where such catastrophes will occur, we can help our clients prepare for the unexpected, minimizing the financial and emotional strain they may face if disaster strikes.

As financial advisors, we often prioritize our focus on growing wealth, diversifying investments, and aiming to help our clients secure financial futures. However, it’s equally important to help them prepare for worst-case scenarios. Though we can never anticipate every disaster, taking steps to protect their financial security in advance can make all the difference when the unthinkable happens.

Here are the five steps advisors can walk through with their clients so they will be prepared to navigate the unexpected:

1. Assign clear responsibilities

When disaster strikes, it’s crucial to know who is in charge of managing finances and making decisions. Clients should have a plan for who will step in to handle their financial matters if they are incapacitated or personally unable to manage them. This may include naming a trusted family member, an attorney, or a financial professional to take charge in a crisis.

Work with your clients to outline a succession plan that designates decision-makers in various situations. This ensures that no matter what happens, there’s always someone with the knowledge and authority to act on their behalf.

2. Ensure liquidity

During a catastrophe, having access to cash can make a world of difference. Whether it’s for immediate expenses, repairs, or just getting through the initial stages of recovery, liquidity provides the flexibility needed to navigate a crisis.

Help your clients build an emergency fund that can cover at least three to six months of living expenses. Additionally, review their lines of credit and other liquid assets to ensure they have easy access to funds if needed. The more prepared they are financially, the easier it will be to handle unexpected challenges.

3. Manage debt

Debt, particularly when tied to personal guarantees or business loans, can become a significant burden during a crisis. It’s essential for clients to understand the risks associated with their debt, especially any contingencies or clauses that could be triggered by a catastrophic event.

Work with your clients to assess their debt load and guide them toward strategies for reducing it. Whether it’s paying down loans or consolidating debt, minimizing liabilities can help provide the financial breathing room needed during a crisis.

4. Simplify financial structures

Complex financial structures can create confusion and make it more difficult to respond quickly when disaster strikes. Encourage your clients to simplify their financial lives where possible. This could mean consolidating accounts, eliminating unnecessary investments, or streamlining their insurance coverage.

By reducing complexity, clients will have a clearer understanding of their financial picture, which will make it easier to act decisively in a crisis.

5. Ensure transparency

In a crisis, information is power. Clients should have easy access to their important financial documents, account details, insurance policies, and other essential records. Make sure they know where everything is stored, ideally in the cloud, and that trusted family members or advisors have access as well.

You can help by organizing their financial documents and passwords to ensure they have both physical and digital copies stored securely. Providing transparency reduces stress and helps ensure that important decisions can be made quickly, when every second counts.

Preparing for the worst, while expecting the best

While it’s second nature for advisors to prioritize growing wealth and planning for the future, it is just as important to prepare for the unexpected. Natural disasters, health emergencies, and financial setbacks are often unforeseen. But having a plan in place allows clients to respond with clarity and confidence.

By addressing these five key areas – accountability, liquidity, debt management, simplicity, and transparency – you can help your clients build resilience and peace of mind in the face of uncertainty. Planning for the worst doesn’t mean expecting it. It simply means ensuring that they’ll be better equipped to handle whatever life throws their way.

Encourage your clients to take these steps now. While the hope is that these preparations will never be tested, having them in place can prove to be invaluable if and when disaster strikes. The goal is to ensure your clients are as prepared as possible, so in the event they need to take action, they have the tools to recover and rebuild with strength and resilience.

Joe Duran is managing partner at Rise Growth Partners.