The Pros and Cons of Financial Planners as Reverse Mortgage Referral Partners

There have long been challenges associated with building partnerships between reverse mortgage originators and the financial planning community, either because of some personal biases or because they may not be allowed to offer the idea of using a reverse mortgage as a financial tool by their institutions. Recent indications have illustrated, though, that more in the financial planning community are starting to come around on the idea of recommending a reverse mortgage to their base of clients.

While many reverse mortgage educators and loan officers have advocated for greater participation in the industry by financial advisors, that advocacy is not universal. At least one reverse mortgage loan officer actually sees the courting of financial advisors not just as a waste of time, but as potentially detrimental to the mission of generating leads that culminate in new business.

The argument against courting financial planners

“I feel like our industry has it all wrong regarding the benefits of financial planners as a referral source,” says Kevin Vasquez, a loan officer with Secure Lending, Inc. out of Cleveland, Ohio, though most of the company’s business is generated in California. Vasquez relates pride when he says that with only eight loan officers in its employ, Secure Lending sits at number 47 on Reverse Market Insight’s Top 100 HECM Originators report based on December 2018 figures.

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Issues relating to reduced volume are not due to lower principal limits or new financial assessment requirements, Vasquez says, but rather on the industry’s overriding desire to court financial professionals that, in most cases, want nothing to do with reverse mortgage products.

“I believe it is due to the industry placing so much focus on trying to convince financial planners, who by the way only represent [a fraction] of the seniors,” he says. “Those seniors don’t even need a reverse mortgage, as opposed to advertising and marketing to the [vast majority] of seniors who actually need the product.”

There are also far too many “hopes” that lenders or loan officers have in appealing to financial planners that don’t have any guarantee of being fulfilled, Vasquez says. In marketing to them, a very specific sequence of events will have to happen for the relationship to bear fruit, and the likelihood that everything that needs to happen will actually pan out is slim.

“If you still want to market to financial planners, here’s what you’re hoping for: first, you’re hoping that the company that the financial planner is employed by does not forbid suggesting the reverse mortgage to any of their clients,” Vasquez says. “Then, you’re hoping to overcome the individual financial planner’s [likely] negative attitude toward the reverse mortgage.”

After that, a loan officer will hope that a planner will speak to a client about a reverse mortgage, before hoping to overcome the negative attitude toward the product that those clients they may refer could have. Finally, the hope is that those clients who make it through all of those preceding steps will ultimately qualify for a reverse mortgage, he explains.

“I just think that’s too much to hope for,” Vasquez says.

The answer to these problems lie in broader outreach efforts and direct conversations with seniors, and in expanding advertising efforts to the mediums that seniors are most engaged with, says Vasquez.

“I love this industry, and think what would really help it is less talking to financial planners, and more advertising on TV with people like Tom Selleck to promote our product,” he says. “That’s what people see, and why AAG is the top dog in our industry. When you’re talking to financial planners, you’re only dealing with a small percentage of people who even have a financial planner, most of whom don’t need any money.”

The argument for courting financial planners

Vasquez’s arguments against the idea of courting financial planners is unconvincing to Tom O’Donoghue, former reverse mortgage team leader at HomeBridge Financial Services and now the principal at Reverse Loans Now in Southern California.

“Why would you cut out a whole source of possible business because you don’t want to try and see what happens?” O’Donoghue says. “I find that financial planners are a huge benefit to my business. I probably get 25 percent of my business from financial planners themselves.”

When first starting out originating reverse mortgages, O’Donoghue noted that financial planners would express apprehension to him about the recommendation of reverse mortgages to their clients. Over the past few years, however, he’s noticed that’s started to change and have a direct influence on his ability to generate more new business.

“For the last three-plus years, there’s been a huge change of heart in how they perceive reverse mortgage products,” he says. “They’ve had clients with the best-laid plans, but then if something catastrophic happens, their portfolio may not have the chops to make [their resources] last. So, they sought out other alternatives. And, lo and behold, because of my marketing they were able to contact me to find out how a reverse mortgage could really make a difference.”

While O’Donoghue does still encounter occasional resistance from some financial planners he meets, it doesn’t last once he’s had time to sit down and talk with them, and go over the concerns they have, he says.

“After sitting down with them over a cup of coffee and explaining how a reverse mortgage really works, their opinion changes,” he says. “I have yet to have a financial planner I’ve spoken with still tell me they’ll never [recommend] it. They’ve always stayed open to it.”

At the end of the day, what it comes down to is using the right tool for the right job. O’Donoghue expressed that to RMD with an analogy he uses when conducting his business.

“If you and I are sick, and you have a cold and I have cancer, and the doctor gives us both chemotherapy, then he’s a quack,” he says. “You need chicken noodle soup and a box of tissues, and I need chemo. So, the financial planner or doctor needs to do the right financial analysis to find out what the right treatment is to get you back to living and thriving again.”

That analogy is akin to what O’Donoghue tells financial planners when meeting with them, and he courts their business primarily by first asking a direct client if they have a financial planner. Most of the time his clients do have them, so he asks the client for the planner’s contact information and has a discussion with them about the realities of reverse mortgage products.

From there, establishing that initial contact after a successful reverse mortgage transaction often leads to the planner referring his services to other clients, so O’Donoghue is very adamant that these kinds of ties should continue to be cultivated wherever possible.

“I think we need to continue to foster those relationships and build them, and reach out without being afraid,” O’Donoghue says.

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