Financial Planners Coming Around to Reverse Mortgages Through Re-Education

Take it from Dr. John Salter, who has spent many months studying reverse mortgages in depth to determine their effectiveness as a retirement planning tool: the products will be part of the long term conversation. How long it will take remains a question, but through the research of Salter in his work at Texas Tech University and now his work on an educational campaign to help planners learn the ins and outs of reverse mortgages, the landscape is going to get brighter.

In going in to seminars with the financial planning community, Salter says, one of the biggest hurdles is re-education.

“The first third of the talk is always: ‘They’re expensive.’ And that was our thought too, prior to being educated,” Salter says. His research, conducted along with financial planning guru Harold Evensky, shows the use of the Home Equity Conversion Mortgage Saver as a retirement planning game-changer. The very low upfront fees and credit line growth feature are two points on which Salter says he does much of the educating.


But by the end of a seminar, reverse mortgages are the hot topic.

“Most of the questions at the end of the talk are about reverse mortgages,” he says. “People say they learned a lot. For us, it’s about getting the education across and then up to the planner to listen and make their own judgement as to whether they use it or not.”

Contrary to some belief that communicating with financial planners should involve a conversation about how reverse mortgages add value to financial planners, Salter says it absolutely should not come up in the conversation.

“That’s just another potential way to give the industry a black eye. It will come across as ‘this is a way for you to make more money as a financial planner,'” he says. “Everyone should be required to do what’s in the client’s best interest. It’s no different from the talk about paying an originator [on the loan amount]. You should just get paid for selling.”

Among both financial planners and his own clients, Salter says the reception has been very positive once the misinformation stands corrected and the benefits are seen to outweigh the costs. Above all, however, the financial planners still stand as one of several reverse mortgage “gatekeepers,” like adult children or other potential influencers of those in the decision-making chair. 

“The thing about educating planners is, people trust their planner,” Salter says “If we say this is something we should look at, they’ll probably listen.” In addition, looking at the product as a one-size-fits-most solution is also probably not going to provide much of an outcome. 

“When it comes to your financial situation, the averages don’t work. There are rules of thumb, and they apply to people with 2.3 kids and 3.1 cars—not an individual person. It’s taking those principles, though, and applying them.”

Written by Elizabeth Ecker

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  • Dr. Salter speaks one language and the reverse mortgage industry another.  

    When MetLife was focused on financial advisors the NRMLA sessions were addressing helping financial advisors see how they can make more money by using proceeds to purchase assets (commission based “advisors’) or if they were fee based (in the eyes of our industry), i.e., they charged a percentage for assets under management (hardly a fee based practice), then you sold them on the idea that a reverse mortgage could be used to increase the amount of assets under management.  They had no idea what to do with per hour fee based (real fee based) financial planners!!!Dr. Salter talks about MetLife fee structured Savers but the industry today is much different with most lenders charging an origination fee.  Thus the total upfront costs for a Saver for a $625,500 appraised value home is not $1,900-$2,200 or so but $7,900-$8,200 or so.  Perhaps that is low cost compared to a Standard but it is much higher than a HELOC or the Savers that have been used in many financial planning examples.

    Dr. Salter is talking about a different demographic while we are still focused not on the needs based client but on the needy and desperate client who would be or would be close to being disqualified on a stringent financial assessment basis as the originators and wholesale customers of MetLife discovered.

    The real question is whether the industry is willing and able to move forward on this front.  While our mouths may be saying “yes,” our endorsements on Savers keep going down.  The group Dr. Salter is speaking about is more immune to the problems of lower or higher values or equity.  Yet we seem lost on how to bridge the gap between mental acceptance of Dr. Salter is saying and its practical application.  It is my contention that the present core of originators (with exceptions) are incapable of that task.  So far the numbers are telling the same tale.

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