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. 


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

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  • Good article by Jessica. There are a lot of misconceptions out there within the “Broker Dealer community about reverse mortgages and rightfully so!

    Curtis Cloke brings out very good points that should be recognized by “Broker Dealers” (BD’s).

    One important item has to do with the Financial Industries Regulatory Authority (FINRA). As mentioned in the article and by Cloke, FINRA has changed its warnings about the HECM, moving away from language that labels it an option of last resort. This is very important and very important to us to bring this FINRA change up in conversations we have with BD’s!

    BD’s are income and compensation motivated, this can be a problem for us out in the field because we can’t compensate the BD for referring over a client to us.

    Cloke goes on to say that BD’s are hesitant to take on risk without the prospect of compensation. However, many times compensation should not be the main motivating factor. Instead, the clients best interest should always be the number one and main concern!

    To often good professionals will advise or give assistance in helping a senior client in an area that will help their retirement needs! The professionals may not be compensated in dollars, however, they will be compensated but in the creation of good will, referrals and knowing as a BD, you did what was right and beneficial to your client!

    John A. Smaldone

    • John,

      By and large we agree.

      Most sellers of insurance and securities will be compensated when their client gets a HECM. After all most such advisers are asset managers who will get cash to buy securities.

      I do not want to take on risk with no offsetting compensation. Why would anyone? Like I said most advisers will get compensation through their asset management services.

      If I do something wrong (other than over billing) and know the client would be compensated at my expense if I brought it up, even though it is in the client’s best interest to bring it, I will not expose it unless the cost is insignificant to me or I see no way around it. Otherwise I will pray for mercy and grace.

      I hope you had a great weekend.

      • Carmine,

        You are right on, glad we agree and I hoe you had a great weekend as well Carmine.

        Thank you,


  • There is a lot of anecdotal information in this column but little empirical data. As a trained skeptic, I believe what the numbers and trends tell us, not those trying to demonstrate through words, their value to the industry. While meaningful demand is getting better than it was in October 2017, compared to demand in fiscal 2017, the recovery in demand will be a slow process.

    Mr. Cloke tells us he is seeing a noticeable difference in the attitudes being expressed by BDs; that is most likely very true. No one is doubting his observation just how long will it take to see changes in our numbers as a result. Since 2013 NRMLA has been telling the industry that their efforts at striking out at negative press was seeing results in less negative press about reverse mortgages. Again we can see that but is that making any difference to demand?

    Our industry has a growing reputation of retaliation. Not that long ago, a tax adviser whom I called on the carpet about a tax position he expressed about the tax consequences of foreclosure on reverse mortgage borrowers and their heirs immediately replied that I was right and he knew it when he wrote his article. BUT he wrote what he did to avoid thousands of emails from the industry complaining about what he wrote. Is that what we need, more false information because of fear of retaliation? There is no question we have that right but are the results that palatable?

    We need more demand. It is great what Mr. Cloke is doing but what will it result in? If the E&O and professional liability insurance companies of BDs agree with his position will that do little more than raise premium prices? Will BDs be pleased with the results? We often talk about the unintended consequences resulting from the actions of the well intended. Will going to the insurance companies to make our point backfire?

  • I would be curious to see if any broker-dealer or their E&O or liability insurance carrier would have a problem with an advisor recommending AGAINST a reverse mortgage. I’m thinking probably not.

    Such a recommendation would imply a full understanding of the program, absent which the recommendation could well result in harm (lost benefit) to the advisor’s client…with a resulting claim for damages.

    So the advisor is left with having to simply ‘stone wall’ any discussion of reverse mortgages with his/her clients; a sad situation indeed.

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