Retirement Expert Joins Call for Broker-Dealers to Lift Reverse Mortgage Ban

For the last several years, the reverse mortgage industry has worked hard to build connections with financial advisors and educate them about the important role housing wealth can play in retirement income planning. 

But many reverse professionals say they often hit a roadblock because some broker-dealers prevent their advisors from discussing reverse mortgages with clients. Recently, RMD published a story about a financial advisor who was fined by his BD for recommending that a client connect with a reverse mortgage specialist, and the story ignited a heated discussion online about what can be done to address the issue.

Curtis Cloke, the founder and CEO of THRIVE University — a series of seminars for financial advisors — and an adjunct professor at the American College of Financial Services, is joining the conversation, urging BDs to reconsider the compliance shutdown. 

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Cloke has been training financial professionals about retirement income distribution for 25 years. He is well-known in the advisor community, traveling frequently to present on the conference circuit, and he’s been vocal about the need for BDs to repeal their restraints. While he acknowledges that valid concerns have shaped this policy, he insists that reverse mortgages are too important for BDs to simply ban any conversation about their potential use. 

Valid reasons

Cloke says there are several motivations behind the ban, which he says is common throughout the planning world. First, he points to a general lack of knowledge about reverse mortgages and how they’ve evolved. He says that many are unaware that the Financial Industry Regulatory Authority (FINRA) has changed its warnings about the product, moving away from language that labels it an option of last resort.

He also says BDs are hesitant to take on risk without the prospect of compensation. 

“I think that’s a fair comment, but I am quick to point out to broker-dealers that there are a number of things that we take on as risk as financial professionals that we don’t get paid for, but we don’t stop short of giving advice if it’s the upright, fiduciary thing to do,” he says.

Cloke also says many BDs point to the fact that reverse mortgages are excluded from their errors and omissions (E&O) insurance coverage, which is a legitimate problem. 

“We as an industry need to help these E&O carriers understand that this is a fiduciary matter that we should be able to discuss openly,” Cloke says. “We need to work on the E&O carriers and make sure they understand that discussing reverse mortgages is a reasonable and ethical activity that financial professionals should be doing.”

Solving the problem

Solving the problem will require BDs to recognize the Home Equity Conversion Mortgage’s importance and establish policies to support discussion about it, Cloke says.

“It’s about how we can set policies and processes that limit our risk and ethically allow us to discuss openly topics that are extremely relevant to our world,” he says. “I think standards can be easily applied, such as rules that say you don’t advise on a reverse mortgage, but you talk about reverse mortgages and what they may do and what fact patterns they may fit; the ability to refer clients to a HUD website to learn more about reverse mortgages; or the ability to call a licensed reverse mortgage specialist.”

“Those are principles and practices that we can adopt that really don’t, at the end of the day, provide any real risk,” Cloke says. “It’s just like referring them to a lawyer or other professional, for which we don’t get paid but yet allows us to address all the financial wealth aspects of dealing with that client.”

Cloke says establishing consequences will help. 

“We need to have disciplinary action for those advisors who don’t play by the rules. For example, you can’t put assets from a reverse mortgage into an investment; you can’t put assets from a reverse mortgage in life insurance. There are a lot of things you cannot do with a reverse mortgage under the law,” he says. “As long as we create those policies and we discipline those who don’t act appropriately — like we do in every other aspect — then we are setting a progressive and offensive stance rather than simply just digging our own head in the sand because we have our own biases or because we are not up to speed on how a reverse mortgage has changed.”


Cloke says overcoming the resistance from individual compliance officers may be an issue.

“I promise you, much of this is comes from the compliance departments’ own bias at hearing the words ‘reverse mortgage,’” he says. “We can address those who are willing to ask the questions openly and honestly, but it’s going to be a bigger hurdle for those who have their own personal biases to the term.”

Still, Cloke says he senses a shift taking place. 

“We’re starting to see some movement with BDs who have chosen to actually ask the questions and learn what’s new. They are changing their minds and they’re actually understanding that this has become a real fiduciary matter,” he says. “I think we’ll see some gradual movement over time.”

Written by Jessica Guerin