Tips for Turning Financial Advisors into Reverse Mortgage Partners

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.

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  • “”Home equity is an asset, and the appreciation or depreciation can’t be debated regardless of whether the mortgage is paid off.”” I may be an inactive CPA at this point in my career but to read that home equity is an asset written by a member of an industry that has seen so many of its customers experience that equity turn negative was once again surprising.

    Home equity is the answer to a math word problem in real estate or it is a legal term. Too many in the industry believe that if the UPB exceeds the market value of the home, something magical happens and the nonrecourse nature of the reverse mortgage takes over and home equity is suddenly limited to zero at that moment and stays there even if debt grows faster than home appreciation. BUT that is nonsense.

    Nonrecourse is only applicable at termination and means that if the borrower does not pay the balance due, the lender can take the home without going through the courts but can only take it as payment in full. For example, if a senior came into $400,000 in cash and wants to pay off his reverse mortgage of $425,000 when his house is only worth $300,000, either the borrower pays the $425,000 in full or the loan stays in place until termination. Somehow he was misled to believe that he could NEVER owe more than 95% of the appraised value of the home (which would be about $285,000).

    To be clear there is no appreciation or depreciation of home equity. There are increases and decreases in home equity but only the home appreciates or depreciates. So, yes, the appreciation and depreciation of home equity can easily be debated with or without a mortgage.

    While this may appear nit picky to some, you do not know how many times I hear that nonrecourse means the borrower can NEVER owe more than the value of the home. Such is not the case with reverse mortgages unless stated so in the loan docs which I have never seen.

    On the other hand, I wholeheartedly agree with the following claim: “‘Understand when you go into the offices of financial advisors, you have a valuable product that can have significant value for their clients.’” Unfortunately some get their eyes off the product and onto the position of the financial advisor.

  • Let us carefully consider this rather loose talk about being partners of any kind with a professional.

    While some will gladly accept that terminology, others will totally resent that language and you for using it. If one of my real partners ever came into my office introducing a person as his partner of any kind, I would smile while sharpening my tongue for a meeting with my partners to discuss such loose language. Remember you are how others perceive you. You can kill a relationship with such loose language.

    Why are such names so casually used? The relationship you develop does not need a lot of flamboyance and fancy names. If it is real and solid it is fine to talk about working on clients together but stay away from the flamboyant descriptions of your relationship.

    One has to realize that we are still at the bottom in terms of HECM endorsements for the last decade (except for fiscal 2019) and barely climbing. Seven months of case number assignments for this fiscal year are already behind us (using the four month lag rule of thumb). Let us not be fooled so easy as to believe the industry has mastered the art of gaining professional referral sources. We have a lot to learn even when it comes to proprietary reverse mortgages.

    Yet what is presented above is a good place to start. Take no one’s method as having achieved where we need to be. 300,000 HECM endorsements might have been a realistic goal for fiscal 2018 back in fiscal 2015, if we had had the marketing, follow up systems in place, and, yes, even collaboration so many thought was in place, we might have reached 100,000 endorsements. There was some of what was needed but there was no way this industry was adequately prepared to undertake a project of that magnitude and it is clear we are not there yet. Yes, our products need some adjustment but so do we.

    No one should mock the efforts of AAG when it comes to celebrities. Where is there anything better? The message still needs improvement and hopefully that will come with time. BUT it was not some great originators that woke me up to reverse mortgages but the work of David Peskin at Lenders’ Leads and their commercial with Jerry Orbach that actually woke me up after calling a few dozen originators to learn something about HECMs. Although the disc and other information I got when calling to Lender Leads helped, it was Jerry who grabbed my attention. I was by good fortune placed with a team of two gentlemen I could work with in placing a HECM for the widow of a close but deceased friend. That team made the origination go very smoothly and they listened to my questions and way of analyzing the loan rather than trying to help me understand how they analyzed it. I still owe a debt of gratitude to those two men.

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