Certified Financial Planners (CFPs) that have historically been resistant to the use of reverse mortgages in stabilizing the finances of their clients are continuing to evolve their perspectives on reverse mortgage products in a few key ways, and continual refinement of the language that originators can use in attempting to appeal to them as referral partners can be very beneficial for the industry as a whole.
Key to this will be the actions that reverse mortgage professionals take in substantively “moving the needle” to change outreach with financial advisors into substantive business partnerships that can expand the reverse mortgage business.
This is according to a panel of sales and reverse mortgage professionals that took place at the National Reverse Mortgage Lenders Association (NRMLA) Annual Meeting in Nashville, Tenn. in November.
Evolution beyond a ‘last resort’
More financial professionals are beginning to see that reverse mortgages can be a viable option in securing their clients’ portfolios because strategic use cases are becoming more and more common. This is appealing to financial planners who are primarily interested in mitigating risk for the portfolios they oversee, according to Hank Sanders, strategic business specialist at American Advisors Group (AAG).
“People are starting to understand how [reverse mortgages] can be used strategically as opposed to a last resort option,” Sanders says. “The Home Equity Conversion Mortgage (HECM) line of credit can help recharacterize that conversation. Home equity is an asset, and the appreciation or depreciation can’t be debated regardless of whether the mortgage is paid off.”
When unpacking the concept for CFPs and other financial advisors, a core concept can emerge that can help those financial professionals realize that reverse mortgages can be used to minimize the risk of loss.
“They realize that this thing is very unique in the financial world, and that there’s nothing else that does what this does,” Sanders says. “By showing what this does and how it moves over time, that can speak the language of financial advisors. The value of the asset increasing while under management puts it into a concept the advisor can easily understand.”
Particularly in regards to HECM line of credit growth, advisors begin to realize that there are potential strategies they can use along with recognizing the value of what that HECM LOC could represent to their assets under management (AUM).
Speaking the ‘language’ of financial advisors
In appealing to financial advisors, speaking their proverbial “language” is essential in order to allow them to understand the potential benefits a reverse mortgage could provide their clients on their own terms, according to Ryan Ponsford, strategic business specialist at AAG.
“Advisors are in the risk management world, so that’s the language that reverse mortgage professionals need to speak to them in,” Ponsford says. “[That allows] you to start getting into a value conversation.”
Additionally, there can be a misconception among some financial professionals that a reverse mortgage, in the end, is “simply” a mortgage that has the same kinds of limitations in a portfolio as a traditional, forward mortgage. Correcting that perception and opening up about possible use cases can be an effective strategy in appealing to financial advisors, according to Stephen Resch, VP of retirement strategies at Finance of America Reverse (FAR).
“This does more than a traditional mortgage: it integrates insurance, it can be a risk management tool, and it lowers the cost of accessing liquidity,” Resch says. “Go in fully believing that this is a product that financial advisors can use to enhance their clients’ retirement plans. I’ve never had a situation where I talk through the costs with someone and they tell me the deal can’t be done. Understand when you go into the offices of financial advisors, you have a valuable product that can have significant value for their clients.”
Opening partners up to reverse mortgages
One of the things that reverse mortgage professionals should be doing in terms of appealing to financial planners involves asking themselves if they simply want a transaction, or if they want a more substantive relationship, Ponsford says. That can also lead to ask if a reverse professional wants referrals, or introductions: a semantic difference that could also offer a distinction to a potential partnership.
“It emphasizes a relationship element by saying ‘introduction’ instead of keeping the conversation in purely transactional territory,” Ponsford says. “There’s something to be said for changing that mindset.”
The same can be said for the way the products themselves are described to the advisor by the reverse mortgage professional: Offering “products” keeps things purely transactional, while offering “solutions” can further appeal to the mindsets of financial advisors.
“What we’ve found is that it’s hard to walk people through a relationship process,” he says. “How do you move someone from being a contact, to a connection, to a collaborative partner? You’re in the relationship-building business, and your job is to move them from a state of opposition to a state of openness to reverse mortgage products.”
While some in the industry “give AAG grief” for its commercials starring actor Tom Selleck, Ponsford says, those commercials do a lot in terms of moving people to a state of openness regarding reverse mortgages, Ponsford says.
“I don’t see my fellow panelists as competitors, because we’re all working to move people up from contact to collaborative partner,” Ponsford adds.