Reverse

Spotlight: Jamie Hopkins Talks HECMs

Written by Jessica Guerin      , as originally published in The Reverse Review.

Financial planning guru Jamie Hopkins believes in taking a comprehensive approach when crafting a retirement plan, and he says home equity should be part of that equation.

Named one of the top 40 under 40 financial service professionals by InvestmentNews, Hopkins is the co-director of the New York Life Center for Retirement Income and an associate professor at The American College in Bryn Mawr, Pennsylvania, where he teaches courses in retirement, estate planning and life insurance. Lately, the frequent Forbes contributor, who is slated to speak at this month’s NRMLA conference in New York City, has been gaining attention for his adamant support for reverse mortgages.

“Baby boomers are moving into retirement and they simply don’t have enough assets saved,” he says. “The main asset they have besides Social Security benefits is home equity. People are going to have to start using home equity as a strategic tool for their retirement income planning. It’s going to be the saving grace for a lot of these individuals.”

Hopkins says he began paying attention to the use of reverse mortgages in an overall retirement income strategy about four years ago upon reading research from John Salter, Barry Sacks and others exploring its use. He incorporated this research into coursework for the Retirement Income Certified Professional program, a course he created at the American College that currently includes 1,000 financial advisors.

“When you take a comprehensive view, you have to look at home equity. We are finally seeing good research supporting the use of reverse mortgages, where before it was almost a niche market in some regard,” he says. “The research suggests that a lot of people should be looking at this and using it as part of their plan.”

While he has written numerous articles for Forbes detailing how a reverse mortgage could be useful, he admits that the public and the financial planning community have been slow to catch on.

“I think part of the misconception is driven by old rules and new rules. The HECM has undergone changes, and whenever you have constant change you have news media that tends to push the negative,” he says, adding that a lack of familiarity doesn’t help. “People are very familiar with a traditional mortgage, but they just don’t have experience with reverse mortgages. When you’re not experienced with something and you just hear little bits and pieces about it here and there, it’s always going to be a challenge to make sure it’s understood.”

Hopkins says Americans in general have very poor financial literacy and even worse retirement income literacy, which doesn’t help matters. “At the American College, we do a very large literacy test of Americans for retirement income planning and they do very poorly. Very few of them can actually pass the exam. It’s not just reverse mortgages that they don’t understand, but also annuity products and insurance products and withdraw strategies. All of those products struggle with misconceptions as well, but reverse mortgages might struggle more, because the misconceptions actually keep people from considering the product.”

Hopkins says it will take time to improve the public’s understanding of HECMs, and that connecting with financial advisors is the first step.

“We’ve got to start targeting financial services, because they’re the ones who are client-facing—they connect with the clients who are the right people for reverse mortgages. So as we get more financial advisors and more companies on board, which will be a big challenge, then we’ll see adoption rates start going up.”

But Hopkins admits that this will be a difficult task. “There are compliance issues for some companies, which is a problem. Certain companies just can’t talk about reverse mortgages and suggest their use. There are still legal hindrances that have slowed down the development and adoption of reverse mortgages in the broader industry.”

According to Hopkins, another hurdle is the lack of financial planning software that incorporates HECMs. “That is another huge challenge right now. You can tell a financial advisor, ‘Let’s use a reverse mortgage,’ but very few software programs out there have that ability built in, so they have to do a lot of extra work just to go down that path,” he says. “Once you see software programs building in reverse mortgages, things will improve.”

But Hopkins says he does believe things will change in time. “There’s research. There are more and more positive articles. There are people in financial services writing about this and how to use this strategically. But it’s not a clear path when you’ve got compliance issues and when you’ve got a misunderstanding about reverse mortgages, so it is going to take time.”

Hopkins says recent changes to the program are helpful because they allow reverse specialists to reintroduce the product. “They are good talking points for people. You can now say, ‘Look, there were problems and the government has moved to solve a lot of these problems.’”

But in order for reverse professionals to really succeed in building connections with the financial planning community, Hopkins says they need to learn to speak their language. “The reverse mortgage industry needs to better understand what financial advisors are doing. I too often talk to reverse mortgage experts who say they know everything about reverse mortgages, but they really don’t quite understand what financial services are doing with retirement income planning. They need to learn the language so they can properly explain it to somebody in that industry and explain how it’s going to benefit them,” he says. “They need to educate themselves about retirement income strategy.”

Despite the challenges, Hopkins says he thinks the industry can tackle the hurdles it faces and push the HECM further into the mainstream—and he doesn’t even think it will take all that long.

“I think over the next five or so years we’ll start to see more positive press, more educated financial advisors and more research. All the groundwork is starting to build, but now we’ve got to get it to that next step where financial advisors and companies begin to build this into their process and communicate the benefits to their clients.”

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