Trees burned by wildfires in northern Manitoba are shown during a helicopter tour in the surrounding area of Flin Flon on June 12.Mike Deal/The Canadian Press
As wildfires threaten vast swaths of Western Canada, many clients find themselves bracing for impact.
In 2023, Canada had the most destructive wildfire season ever recorded, and this year is quickly shaping up to be the second worst on record. With forecasters expecting more severe weather, how can advisors help clients with property in fire-prone areas protect themselves and their investments?
“The first thing is making sure [clients] have [property] insurance,” says Janine Guenther, portfolio manager and senior family wealth advisor with Bellwether Investment Management in Vancouver.
As severe weather increases, insurers are grappling with more claims and higher losses – a record $8.5-billion in 2024. As a result, some companies are hiking premiums or changing coverage for events such as evacuation orders, she says, so it’s important to know what’s covered in such situations.
With some seasonal properties, insurance isn’t available where rural areas lack firefighting services. Ms. Guenther says it’s important for clients buying vacation properties to understand the location and “have your head on straight” – no matter how beautiful the view.
But she also says owning in uninsured areas is a “calculated risk” many are willing to take. Those with uninsurable properties can take precautions such as investing in fire pumps and clearing the underbrush, she adds.
Self-insurance is another option. Before wildfires took over the Pacific Palisades in Los Angeles in January, some wealthy homeowners had chosen to forgo insurance because “it’s the land that’s valuable, and it’s nothing for them to pay $1,000 a square foot or more to just rebuild on that property,” Ms. Guenther says. But self-insurance requires considerable cash reserves.
For most clients, the next line of defence is an emergency fund or liquidity plan that covers three to six months of living expenses.
When disaster strikes, it’s more difficult to make good decisions, says Rob Tetrault, senior investment advisor and senior portfolio manager with Tetrault Wealth Advisory Group at CG Wealth Management in Winnipeg. So, having a plan in place eases decision-making and reduces the emotional toll.
He has a few clients who lost their cottages to wildfires in Manitoba’s Whiteshell region this spring.
“They’re not thinking about long-term growth in their portfolio, or how their U.S. stocks are doing. They’re in a grieving stage,” Mr. Tetrault says. “It’s shock, it’s grief. Because it’s not just a building – it’s memories, it’s history, it’s their sanctuary.”
For that reason, it’s important to address clients’ liquidity needs right away. If there’s an evacuation order, “clients could easily face thousands in short-term expenses such as hotels, travel, food, lost income and pet boarding,” he says.
Unlike a cottage, losing a home affects “every part of a client’s life, including income and stability, [which] makes the need for a clear financial plan even more urgent,” Mr. Tetrault adds.
As part of the overall financial plan, a liquidity plan can include withdrawing a set amount from a TFSA or paying a dividend from a corporate account, he says.
Ms. Guenther says the plan should tap into a client’s liquidity in the most tax-effective way, beginning with cash, then a TFSA, and then a line of credit. Registered retirement savings plans should be the last resort because withdrawals are taxable as income, and the amount can’t be replaced.
For business owners, the combination of lost revenue and fixed costs can add up quickly.
“It’s really important to have business interruption insurance and be really clear on what the lost revenue per day is,” Ms. Guenther says.
In addition, business owners must consider how to support employees because “if you want them to come back when things are better, [the cost] might be much more.”
Another tactic to help clients recover from an emergency is to make important documents easily accessible. These include birth certificates, marriage certificates, insurance policies, licences and passports.
Ms. Guenther recommends a three-pronged approach: keep documents on a computer, save them to an external hard drive, and back them up in the cloud.
Digitizing key documents may prove particularly helpful in the first few days after a wildfire, when it’s imperative to contact the insurance provider. Insurance claims can take a year or more, “so it’s not like you’re getting a cheque the next day or the next week,” Mr. Tetrault says. And if a client’s home is destroyed and certain costs, such as interim housing, aren’t covered, they may seek legal support during the claims process.