For anyone who follows the reverse mortgage industry, it’s almost impossible to avoid the name and brand of American Advisors Group (AAG). The company currently stands as the undisputed leader of the reverse mortgage industry, with the largest market share and arguably the most visible branding in the public consciousness owing to its significant investment in media advertising led by the strong visage of film and television actor Tom Selleck.
First incorporating AAG in 2004, founder and CEO Reza Jahangiri oversaw the company’s leadership in a critical period, going from an estimated 1% market share in 2010 to an estimated 30% within five years. Its television ads are seen on broadcast television, and loan originators who don’t even work for AAG have been open about the benefit that the company’s visibility in the media has brought to the industry as a whole.
In RMD’s inaugural class of Changemakers, it was only natural that we include and honor the accomplishments of Reza Jahangiri, CEO of AAG, as a transformative personality and presence in the reverse mortgage industry.
Do you thrive on making change? Why or why not?
I think anyone that’s had any level of success in this industry has to thrive on making change, at the minimum, they need to be able to respond to change. In terms of proactive change, I think I do thrive.
I don’t like getting complacent with existing patterns. When we’re not changing, then I don’t think we’re growing. That’s because business is similar to all things in life: it’s fluid and dynamic. I think those who do thrive over the long haul are very open to change, and hopefully not just in reacting, but proactively changing. Not going through change for the sake of change, but also for evolving relative to what’s going on with the external environment.
What are some traits or skills that help you to be a changemaker?
I think the fact that we’ve got a team that’s really vision-aligned in terms of why home equity is so important in achieving better outcomes in retirement is helpful. We have conviction in cracking the code to get higher adoption of the concept, and to get more people to benefit from this way of thinking, even though it’s been unconventional, historically.
We have the desire and the willingness to get there no matter what it takes and no matter what the road looks like. Improving, growing, learning and expanding to get to the vision is pretty consistent with how we’re wired.
If something doesn’t end up working out, do you believe that it’s best to ‘fail fast?’
There are exceptions to the rule of failing fast, but generally speaking, I do think failing fast results in better outcomes. Although in the human process, of course that’s not always the way things work. Sometimes we fail slowly, and we look back and think that we should have been more decisive about something when it failed, and just moved on. I think the quicker you realize there’s a failure, and the less resources and time you have invested is usually better.
So, the short answer is yes: I think failing fast is better, but it doesn’t always work that way.
What are the downsides to making change, and how do you try to avoid them?
There are two dimensions here, and I think it’s very relevant for our industry and category. Reacting and responding to external change – like government change, is one facet. Proactively changing to be ahead of the curve, and evolving for what’s coming down the line three or five years from now is another facet.
In one respect, it’s important to be nimble, agile and quick to respond to change when you get curve balls thrown at you. But at the same time, you can’t be sloppy, especially as you get larger. You have to be institutional in how you approach things, as well. If you make a mistake and are sloppy on the front end in terms of how you affect change, then it just cascades and dominoes, and poorly impacts the rest of your process.
In addition, I believe really successful companies know how to compartmentalize innovation and creativity, and they don’t mix it up with the more institutional core practices that get good results. Compartmentalized innovation, creativity and disruptive thinking for forward-thinking change are important. They are sometimes in tension with the daily core business types of change. Getting the balance right is key, especially in a larger environment, it can help thread it into the more institutional thinking for deployment.
Is the reverse mortgage industry changing fast enough today?
Historically in my opinion, we’ve been too slow with change – that is, pre-COVID. In terms of proactive, evolutionary moves to get greater adoption with home equity extraction for retirement, like changing the distribution models and the messaging, we’ve been way too slow. Our resource allocation has been primarily toward reactive change – responding to the curveballs thrown at us by government shifts to our product. This is why the market is where it is.
There are only 30,000-40,000 people a year utilizing these tools for better retirement outcomes, when the demographic and current retirement picture supports multiples of people benefiting from strategic and responsible use of home equity on the front-end of their retirement.
With COVID, I think this may be the one external shake-up that will give us a shot to really accelerate the shift in our business models in more ways than one. This can get the industry acting differently, getting us to a different outcome in terms of consumers’ uptick in this product and the concept. I also think that crises can act as an accelerant for behavioral shifts in consumers. This can be a really powerful pairing.
In terms of your own background, tell me a bit about your early career, and how you first became aware of reverse mortgages.
A friend introduced me to the product concept. They worked in the industry in 2004, and I fell in love with the product and its benefit to senior consumers. I was also drawn to the backdrop of a growing aging population that had greater liquidity needs.
But mostly, what really got to me was the disconnect between perception and the real utility of the product. I thought that the perception would catch up to the utility and that most people had it wrong or just had a general lack of awareness around the product.
Finally, I gravitated towards finance businesses and just jumped in.
Why did you start AAG, and what was the process like to get it off the ground?
I was a healthcare entrepreneur, and had a series of healthcare businesses in the cardiac imaging field. I was a scrappy, nimble entrepreneur, and had just graduated law school.
When I was introduced to this, I actually liked the financial service business more than the healthcare side in terms of my passion, and then the opportunity to solve a complex problem that has social impact was something that I saw from day one. It made a lot of sense, so I made the leap.
In the early days after the establishment of the company, what was the reaction to AAG becoming a new player in the reverse space?
We incorporated in 2004, we launched in July of 2005, and we were very small from around 2005 through post-crisis, around 2009-2010. We had a hands-on, nimble platform. We were very direct-to-consumer focused. And then from 2010 to 2015, we went from around 1% of the market to 30% of the market. We went from 50 or 60 people, and within four years, we were at over 1,000 people. We went from being 100% direct mail in the early days to being 90% television, and then to shifting to a full, diverse online, offline and television-based marketing platform.
In general, during our run-up from 2010 onward, we filled a void when a lot of the big banks left the business in 2012 and 2013. There was a lot of doubt and skepticism about us, as there always is around a new player. People wondered if we were going to last, or if we were going to be fleeting, because many people came in and out of the business at the time. But again, we had conviction in the thesis, and we really believed in the vision.
Even against the initial backdrop of doubt and skeptics, I think the market was very supportive and grateful that we were investing in awareness for our category. I’ve always received nothing but gratitude, even from competitors, about how we’re spending $60, $70, $80 million a year on marketing and creating awareness around a category that still really has not reached critical mass and velocity.
What are some changemaking efforts in the reverse mortgage industry you’re most proud of, in terms of your leadership positions in both AAG and the reverse mortgage industry at-large?
I think we’ve proven over time – and I couldn’t be prouder – that the team of people that work for AAG truly do believe in the core values: caring, driven, ethical, and the purpose they represent. Since we are a purpose-driven business, through the ups and downs and thick and thin, we have people who believe in what we are doing, and how [what we offer] is going to help people, and they stick with AAG and its mission.
That’s probably been the most rewarding thing, and it’s shown itself through the fact that with every downturn there is in the market or the curve balls that are thrown at us with product changes, we come out the other side with more market share. We’re still here, standing and investing, and we’re investing in the dips. Right now, we’re investing in the dip of COVID. We’re leaning in, because we still have conviction that this is going to help millions of people eventually, and that people need to think differently about this category.
Does that extend to broader industry leadership, as well?
I think it does. Obviously from a market share and size perspective, we’re leading the industry. But also, from a behavioral standpoint, when times are tough, we still lean in and we stay on mission. We’ve changed our views on the idea that we will only focus on government products or reverse mortgages. We do feel it’s more about the broader focus on why home equity in general [has a place in the retirement conversation], but it still helps raise the tide in this product category.
How have you had to guide AAG through periods of change particularly as the reverse mortgage industry itself always goes through so much change?
For me, this question is very germane to the past 60 days. During the early days of COVID-19, it became evident that we are a change management company. We’ve gotten pretty good at navigating change through the years. So, when this hit, even though we had to move 1,400 people to work remotely within 10 days, and we had to modify our whole process flow, deal with dislocated capital markets, and adjust to shifts in consumer behaviors in terms of what messages consumers were responding to – we leaned in.
The team has never been stronger, and I think that’s all from the training that comes with being part of a growth business in a market where we really didn’t control our own destiny in relation to the primary product we offered.
What do you think the reverse mortgage industry would look like today if AAG had not been established?
That’s actually a really good, but really tough question. It’s tough to go back in time and replay how history worked out. I think AAG, for the past four years, has been very vocal. I’ve been very vocal within the industry, within NRMLA, with colleagues, in the media, and in the outward world about how we need to create a new category. It needs to be more than just reverse mortgages.
I think [we’ve had] pretty good influence, but with regards to what would have happened if we had not been established in the market, it’s hard to say.
Was there ever a time you did something you thought was best for the industry that you felt the industry didn’t understand, or in other words was just unpopular?
I remember back in late 2016 and early 2017, having the conversation about broader home equity extraction for retirement, and trying to get us all more quickly to identify with that reposition. I wanted us to focus on the ‘why’ first. People theoretically agreed with me, but they just didn’t know how to activate on it.
Now, I think everyone’s fully aligned on the idea that we need to transform. I think for the most part, the industry fully gets the change we’re trying to be and supports it.
What would you say is an example of a changemaking effort that didn’t work out?
The thing that really sits with me is that we actually should have changed faster. It’s less about the [efforts that] failed. I don’t think we’ve had enough failures, that’s how I feel right now when it comes to the proactive, transformational change you’re talking about. I think when things were good in 2013-2016, we should have been leaning in more and evolving and taking more risks.
I could give examples of stuff that failed on an initiative basis, but they’re not as profound as the things that I think we simply didn’t do. A lot of it had to do with resources being allocated in response to the product shifts that were given to us year after year: a new PLF construct, a new MIP construct, utilization restrictions, financial assessment, the October 2017 changes, etc. These are all things that were pretty material to our industry, so they held back some of that more forward-leaning, innovative kind of risk-taking.
We’re in the midst of a major moment of change throughout the world due to the COVID-19 pandemic. What does this moment mean for AAG, and even more broadly, what does it mean for the reverse mortgage industry?
First off, we’re dealing with unprecedented tests and challenges as a country. This is a once-in-100-year event, there’s a lot coming at us and the stakes are high, because our demographic is the most vulnerable population from exposure to this pathogen.
I think we’ve done a great job as a country and as an industry stepping up when seniors need us the most. People need home equity for stability more than ever right now. That’s not going away. We’re seeing everyone come together during COVID – both within our company and in the broader industry – to deliver for the consumers and for the economy. And, the government’s done a phenomenal job allowing for remote appraisals. HUD, FHA, and Ginnie Mae have stepped up in ways that no one’s ever seen before. I think this moment really elevates the fact that we have to do what’s best for the safety and health of our customers and for our employees – even if it takes operating differently and being more virtual in our approach.
I think in times of crisis, the previous playbook goes out the window. There are opportunities that are going to come from all this that just didn’t exist before, and you’ve got to be really open to embracing them. This crisis and our shift to more virtual and digital engagement is allowing consumers to make the connection between home equity and better retirement outcomes like never before. If we at AAG and the industry together continue to be hyper-agile, but also be open to change in terms of how we get to the vision – even if it’s slightly adjusted in terms of what the end state looks like – we’re going to be stronger on the other side.