Financial Advisor Leans on Reverse Mortgages for Retirement Planning

A certified financial planner has been routinely recommending reverse mortgages to his baby boomer clients following the economic downturn as a way to more safely meet retirement goals.

Baby boomers are the worst group of savers in the U.S., advisor Brian Rezny, who has offices in Naperville, Ill. and Naples, Fla., told Financial Planning.

He’s been turning potential clients away who aren’t likely to make significant lifestyle changes in retirement and “simply don’t have enough money” to maintain current living standards, says the article. 

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“People just don’t have the money,” he told Financial Planning. “They lost a lot in 2008, and the horror stories were mounting, one after another: flipper homes; other poor investments, the implosion of real estate. They haven’t made up the losses, but they’ve been overspending and drawing down their principal—so they have much less to live on now than they did 5 years ago.” 

A reverse mortgage can be a way out for clients with not enough savings but a substantial amount of home equity, he believes. While Rezny says he didn’t need to recommend the product five years ago and wouldn’t even discuss it with his clients, he routinely recommends it now—to as much as 90% of his client base.

The loan can be a way to meet retirement goals more safely as it can give investment portfolios another 5-10 years to grow, says Rezny, who advises clients to short-sell properties they may have bought so they can clear up their debt and then get a reverse mortgage. 

Read the full article at Financial Planning. 

Written by Alyssa Gerace 

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  • Most financial planners focus on clients with a good retirement nest egg to make most efficient use of their time, otherwise it can be difficult to make a living, and these are usually the clients that won’t use a reverse mortgage. That being said, a successful financial planner that believes in reverse mortgages might have a referral every couple of years.

    • Too true Lance. The folks where financial planning might make the most difference in their lives are least likely to get it because they don’t have the assets to attract planners’ attention. The gap seems to be: how to pay a planner who focuses on debt AND asset optimization since it doesn’t seem most debt products (like RM) are allowed to compensate them for referrals as asset products typically do.

      • Good point. Regulators and/or industry participants have generally created a firewall between the debt and asset side of things, apparently to protect against the unsafe use of debt to create investable assets (the intention is right but the method is wrong). I’ve been saying this for a long time: it would be better to allow planners to earn a living off both sides of the balance sheet, while still holding them accountable to the unsafe use of debt to create investable assets. That way planners would be more incented to do what’s best for their clients, rather than steer them towards what they can earn a commission on. Without that they’re playing with half a bag of clubs, and making that change would significantly increase their acceptance of reverse mortgages.

    • Mr. Jackson,

      If little changes in the financial planning community your position is correct. Yet things are slowly changing there especially among young planners. The problem is younger planners have proportionately fewer older clients.

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