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Planners find role has changed since Hurricane Katrina

The job description of financial planners on the Mississippi Gulf Coast hasn’t changed that much since Katrina. Their mission is still to help people plan for a secure financial future. But the way the planners do that has shifted.

“Financial planning is still very much necessary,” said Stephen Byrne, CFP, a partner with Thompson Diaz Baxter Byrne and Associates, PA, Retirement Specialists in Biloxi. “It is just that the topics have changed. Clients want to know how they can get reimbursed from FEMA. They need help with SBA applications or even grant applications.”

It is a mistake to think that financial planners only work with people who have investment money. Byrne said after the storm, his firm helped customers with FEMA and SBA applications, and even insurance mediation. These weren’t issues the firm had much familiarity with prior to Katrina.

“But when you are personally affected by it, you become experienced very quickly,” Byrne said. “Two of our partners did not have significant damage, but the other three lost their homes and had severe damages.”

Clients have also needed help with tax planning after the storm. Byrne said to the credit of Congress, it moved very quickly and passed a number of Katrina tax changes. It was important to help clients determine their casualty losses, and then make sure they could take advantage of the new tax rules.

“Even though they are a little complicated, they help,” Byrne said.

The IRS deadline for taxpayers in areas affected by the hurricanes was put off from April 15 to August 28. Byrne said people who didn’t have damages or were fully insured mostly went ahead and filed by April 15. People with significant damage were more likely to put off filing until later in the year to determine their losses, insurance adjustments and to see if they get the new homeowner grant money.

“The grant money will reduce the amount of casualty loss,” Byrne said. “For that reason, you don’t know the amount of your loss until you exhaust all of your resources. People are getting SBA loans because the rate of interest is only 2.68%, which is really good.”

After helping people through the steps of getting initial assistance, applying for grants and understanding the tax laws, the next step is helping them put their homes and lives back together.

“Now we have come full cycle, and we are back to advising people on the smartest way to plan for retirement in view of the changes,” Byrne said. “People who were retired with their home paid for are waking up with a SBA mortgage. It is tough to go backwards. That’s a change. After getting all the help they can, they now need advice on how to best maximize their income during retirement, and at the same time not reduce their lifestyle.”

It is more difficult for people to save in the aftermath of this type of devastating disaster. But Byrne said people who are already invested in company retirement plans are staying the course.

“I haven’t seen anyone back out of their company retirement plan yet,” he said. “That is excellent. They took a hit, but are keeping focused on their goal. If they are working, they are still saving.”

Jennifer Strojny Milligan, CFP, Strojny & Strojny Financial Services in Biloxi, agrees that the needs of clients have changed drastically since August 29, 2005.

“First, of course, are the clients who lost homes and most of their possessions and still have outstanding mortgages and debts on this property,” Milligan said. “While their retirement and financial needs may have been satisfactory prior to the storm, now they must juggle a whole new set of priorities.”

The news hasn’t been all bad. Some clients received windfall payments due to the sale of highly-appreciated property after the storm. Milligan said many of these people were adequately insured and were able to pay off their debt with the insurance money and invest the sales proceeds.

“For the first group, financial planning and savings have become exceedingly difficult, as they struggle to readjust to using hard earned retirement funds and savings to rebuild their lives,” Milligan said. “For the second group, financial planning brings new challenges of learning about the potential markets and investment products suitable for their newfound wealth.”

Milligan said the firm’s business has grown through the disaster of Katrina, as clients quickly became aware the firm was still there and ready to assist them with all aspects of their financial needs.

“We took on new projects such as assistance with SBA financing to help Coast residents get back up and running, and many clients seemed to appreciate our efforts,” she said. “Also, with all of the tax law changes, many taxpayers who had previously prepared their own taxes were at a loss with all of the new forms and changes. Therefore, we were able to assist many new clients with their tax needs.”

The Hurricane Katrina experience is still fresh and raw for many Coast residents. But Milligan is not sure that the lessons of the need for saving for a rainy day have been digested yet.

“Right now, survival is the name of the game for these people,” she said.

A Katrina-type situation is a perfect example for the need for financial planning and preparing for the unexpected.

“Just as devastating might be an illness, loss of job, death of a wage earner, etc.,” said Marty Wagoner, a partner with The Cornerstone Group, Ocean Springs. “Unfortunately, sometimes it takes a catastrophic situation whether nationally, regionally or personally to raise awareness for the need to save. Establishing an emergency fund for these types of situations is a key element of a sound financial plan. Beyond that the basic goals for most people will always be there: funding children’s education, planning for a comfortable retirement and estate planning.”

Obviously, a lot of people have been harmed financially by losses after Katrina. For those it is understandably more difficult to save right now. Wagoner, whose home in Ocean Springs was destroyed by Katrina, said quite a few people have lost a great deal and are in a wait-and-see mode with their rebuilding and insurance resolution.

“Many, however, have found themselves in jobs and businesses than are thriving more since the storm than they ever anticipated,” he said. “Investment firms and banks are finding that many of these people want to save a portion of these funds.”

The Cornerstone Group, LLC, building in downtown Ocean Springs fared well with minimal damage and business activity remained stable shortly after the storm and has grown significantly as the Coast has started the rebuilding process. Three members of the firm had major damage or total loss from Katrina.

“All three are committed to rebuilding,” Wagoner said.

Contact MBJ contributing writer Becky Gillette at bgillette@bellsouth.net.

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