Any Federal Financial Reform Will Be Slow, Professor Tells NRMLA

In a wide-ranging talk to the audience at the National Reverse Mortgage Lenders Association’s eastern regional conference in New York City earlier in April, tax professor Jamie Hopkins preached patience in a financial world fraught with legislative uncertainty.

“Financial services have been in a really big flux for about a year,” said Hopkins, tracing the industry angst back to the announcement of the Department of Labor’s expanded fiduciary rule back in April of last year.

The proposed update, which would require a wider swath of financial advisors to adhere to fiduciary guidelines that bind them to act only in the best interest of their clients, was initially supposed to go into effect in April of this year, but the Trump administration delayed its implementation until June 9.

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The rule would have wide-ranging implications among those who work in the financial services industry, and Hopkins claimed that its current place in regulatory purgatory has caused many financial companies to put any long-term planning on hold until President Trump and his Labor Department make any definitive decisions.

“Personally, I’m in favor of the fiduciary rule, but there are issues with it I understand. Any change is always tough for companies,” he said, noting that firms both large and small had built their businesses around previous government strictures and may now have to make significant changes to the way they operate.

Should the rule eventually become enshrined in federal regulations, Hopkins warned, reverse mortgage professionals and others who provide retirement-planning advice should be very careful about wording. For instance, telling a client about the tax implications of rolling over a 401(k) into an IRA does not qualify as “advice” that would hold one to a fiduciary standard, but suggesting that a person should consider such a rollover would.

He did have one foolproof way of avoiding any trouble, though: “If you give good advice, that’s okay” under just about any circumstances, he said.

Hopkins also gave a quick rundown of his predictions for Social Security, a key issue for many older Americans who might be considering applying for a Home Equity Conversion Mortgage. Long deemed the “third rail” of American politics — because even the slightest attempt to touch it would result in career death — Social Security likely won’t be changing anytime soon, Hopkins said. Along with Medicare, the entrenched Social Security program accounts for 42% of all government expenditures, and even with problems on the horizon as the amount of beneficiaries swells, the coffers should be filled through 2034.

“How many times has the government fixed something 17 to 18 years before the problem occurred?” Hopkins asked rhetorically to scattered laughter from the audience.

Still, Hopkins said that the eventual solution will require hard decisions, describing Social Security as a tub with two faucets, one pointed in and another draining out.

“It’s a social issue and it’s a math problem,” he said, adding that any solution will involve the turning of one or both faucets — with the exact proportions a difficult decision for future lawmakers.

In response to an audience question about how to convince consumers to tap into their home equity with reverse mortgages — Hopkins had opened his remarks by noting that a huge chunk of Americans’ wealth rests in their homes — Hopkins responded that he’d like to see more academics come together and promote the products as smart options in certain cases, though he added that it doesn’t always work.

“Academics love annuities,” he said, naming another often-maligned financial product that Hopkins said suffered from years of overly-aggressive marketing and high fees.

Written by Alex Spanko

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  • The trouble for lenders is when 1) an originator is trained in lender programs reaching out to retirement planning advisers, 2) the training constitutes the only training of the originator in such matters, 3) the originator presents poor advice directly to a consumer with no adviser 4) within the statutory period, the originator is shown to be the source of bad information resulting in a significant loss, does the fiduciary extend to the employing lender and if the lender is a TPO to the supervising approved Mortgagee?

    The interesting thing is that Jamie has turned. He once touted the DOL Fiduciary Rule as favorable to having retirement planning advisers discuss HECMs but now after a year sees it as a possible area of concern for HECM originators and perhaps by extension lenders.

    It seems Jamie’s change of heart is well founded. Today reverse mortgage originators are even calling themselves home equity retirement specialists who to their own potential detriment are broadening the discussion to include advice on matters unrelated to HECMs and that cross the line into areas where the DOL Fiduciary Rule has teeth.

    This is perhaps the best advice that I have read by Jamie on the DOL Fiduciary Rule.

    • I want to second The Positive Realist’s concern re HECM originators adopting the title, “Home Equity Retirement Specialist”. This title broadens their implied area of expertise well beyond the HECM program itself and, as stated, may lead some to offer advice that spreads to areas where they should not tread professionally.

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