Advisers Get Crash Course on Reverse Mortgage Financial Planning Strategies

There is a widespread movement in the reverse mortgage industry to educate professionals such as Realtors and home care workers about how Home Equity Conversion Mortgages can possibly better serve their clients. But most of all, the push for greater reverse mortgage education has largely focused on the financial planning community.

Thanks to recent HECM program changes in the last few years, sensationalist stories that besmirched reverse mortgages in the past have largely given way to media coverage highlighting the much-needed makeover of the HECM product from a loan of last resort to a retirement income planning tool seriously worth considering.

“Reverse mortgages have this negative image in the U.S. for some reasons that were never really fair to begin with,” said Wade Pfau, professor of retirement income at The American College, during a recent webinar hosted by the Financial Experts Network, a Pittsburgh-based company that focuses on educating financial advisors on reverse mortgages.


Many of these legacy issues with the HECM program do not relate to clients today who plan on using a reverse mortgage as part of a coordinated retirement income planning strategy, Pfau noted.

“These issues related to the idea that people were desperate; they did not have sustainable financial plans in place, and basically, a reverse mortgage would have let them kick the can down the road a little further,” he said.

The webinar was held primarily as an educational session to teach advisers how they can fit home equity into a client’s retirement income strategy. During the session, advisers learned an overview of how reverse mortgages work, including their eligibility requirements, various spending options and the different possible uses for HECMs.

About half of the webinar focused on portfolio coordination for retirement spending, with an emphasis on using home equity as a standby reverse mortgage line of credit to create retirement income efficiencies by managing sequence of returns risk—a concept which has been the focal point of research from Pfau, as well as other researchers such as Barry Sacks, Harold Evensky and John Salter, who also participated on the webinar.

Of the more than 200 webinar sign-ups, most of which were financial advisers, approximately 57% tuned into the session—an attendance rate that reflects a higher than average participation rate, according to Tom Dickson, founder of the Financial Experts Network.

Advisers’ interest in the reverse mortgage subject matter became even more apparent during the webinar’s question and answer portion, with much of the questions focused on learning more about what happens when the HECM becomes due; how a reverse mortgage can assist with tax bracket management; as well as the best way to overcome client objections.

“It’s how you present it [a reverse mortgage],” said John Salter, associate professor of financial planning at Texas Tech University. “You do get some pushback, but you have to explain all of the benefits [of using home equity], especially with the winner being set up a reverse mortgage right now and not use it.”

An easy way for advisers to start the conversation about reverse mortgages with their clients, Salter added, is to let them know that research points to early access—especially for the line of credit option—as the best way to use home equity as part of a retirement income plan.

When it comes to recommending a reverse mortgage for clients, it turns out that most advisers have already done so, according to the results from an attendee survey distributed after the webinar provided to RMD.

Answering the question, “Have you ever recommended a reverse mortgage?” 42.8% of advisers responded “yes, for clients that can use income,” while 8.7% responded “yes, for clients that had a conventional mortgage.”

On the flip side, 30.7% of attendees said they have not recommended reverse mortgage because their clients “never needed it,” while 17.5% said “no, because I thought they were too expensive.”

Written by Jason Oliva

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  • Based on the responses one would think that we were at the apex of endorsements. It would not seem that we would be looking at the worst endorsement picture we have seen in more than a decade. This does not mean we are in the midst of an industry depression but neither is it a golden age for endorsements.

    If the unthinkable happens and the endorsement picture is worse next year we will have to begin looking at things much differently. What most of us are expecting is not a bubble of endorsements over this year and next but rather a slow steady growth pattern unless interest rates rise dramatically which seems very unlikely at least for now.

    The responses are not empirical evidence but rather anecdotal which is little more than hearsay. It has always been difficult to trace on an industry wide basis what percentage of originations are coming from the financial services industry. It would be helpful if the industry data being provided to the depository had this income included and such information was provided to the industry as a whole.

    At this juncture I feel like Dusty Springfield singing her hit song “Just Wishin’ and Hopin'” so it is time to move on.

  • I feel the article does point out the new found potential we do have with the financial planning and advisory professionals.

    The article states that thanks to changes over the past few years the reverse mortgage is not looked at so much anymore as just a loan of last resort. I feel the greatest positive impact on that statement has been since April 27, 2015, the implementation of the FA ruling!

    The FA ruling has changed the entire playing field and has put a professional touch on our product that has been needed for years. This is why the opportunity is there for the grabbing with the financial advisory professionals!

    Don’t get me wrong, I am not saying there has not been other contributing factors that come into play with this scenario, on the contrary. I just point out the greater impact has been since April 27th.

    As John Salter put it, “It’s how you present it [a reverse mortgage],” ! This is so very true, we are in the early stages of educating the financial advisory world about the benefits of a reverse mortgage for their clients.

    We need to understand, in-depth as much as we can about how the financial planner works and how they view their clients needs. Once we have a better understanding of their world, we can do a much better job showing them how our product fits into the planning for their clients.

    The article also starts out talking about a tool for the real-estate professional. Actually the FA ruling because of its positive publicity and built in safety indicators, helps us sell the H4P product. Our product now takes on the appearance of a many use program for seniors in a very positive way!

    John A. Smaldone

    • John,

      You very correctly point to a new found relationship with the financial planning community. For their sake, it is too bad that they did not come on board when we had Savers.

      The trouble with our current HECM is it is too restrictive and its upfront costs are higher.

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