Reverse Mortgages Only Suggested by 7% of Financial Advisers

Reverse mortgage lenders have long looked to referrals from financial advisers as a means for finding prospective reverse mortgage borrowers. But only 7% percent of a survey of financial advisers are suggesting that their clients use a reverse mortgage strategy for a retirement income plan, new research from global asset manager Cerulli Associates shows.

Cerulli Associates’ research firm asked advisers about their most frequent use of retirement income products and strategies, and also surveyed 401(k) participants to learn more about their retirement investments.

Financial advisers, the survey shows, have become the primary source of retirement advice for 401(k) participants age 60 and older, many of whom would qualify for a reverse mortgage. It shows that 20% of 401(k) participants between the ages of 60 and 69 relied on their financial advisers’ suggestions.

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Though reverse mortgage lenders have been making a push toward education of financial advisers, this push is being met with some hesitation as few financial planners advise a reverse mortgage strategy as a retirement tool.

Those who do support reverse mortgages have made a strong case for the use of a standby reverse mortgage strategy to improve the chances of financial health among retirement portfolios.

Researchers Shaun Pfeiffer, C. Angus Schaal and John Salter most recently published a report in the Journal of Financial Planning in May, which cited findings suggesting that early establishment of the Home Equity Conversion Mortgage line of credit is beneficial to retirement portfolio survival.

“The results show an estimated 30-year survival advantage for early establishment,” the report states in its conclusion comparing the early establishment of the loan versus prolonging it as a last resort.

With only 7% suggesting seniors invest in reverse mortgages as a retirement income plan, according to Cerulli Associates, the rest of the advisers reported favoring variable annuities with living benefits, fixed-income securities, systematic withdrawals from variable annuities, packaged retirement income mutual funds and annuitization.

To read the full report, click here.

Written by Emily Study

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