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Feature: The Financial Planning Mission

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

Four years ago, FHA issued changes to the HECM program that repositioned the product as a financial planning tool. Since then, conversation among industry players has centered on how we can reach this group and help them realize the important role a reverse mortgage can play in retirement income planning.

This initiative has been aided by a series of research papers written by retirement income experts and academics that highlight the value of the product. Such studies have been published in notable academic journals and have inspired stories in mainstream media outlets like Forbes and The Wall Street Journal, which have published articles extolling the potential benefits of reverse mortgages and suggesting that retirees consider a HECM to fill the retirement income gap.

Certainly, recognition from financial experts and some mainstream media outlets has helped the mission pick up momentum. One would hope that this, in conjunction with sustained efforts from NRMLA and the industry’s leading lenders, would help the movement gain traction.

With so much of the industry’s collective energy focused on this mission, the success of which many have called crucial to the product’s long-term viability, one might naturally wonder how much headway we have actually made. Are we any closer than we were four years ago to getting the financial community to embrace reverse mortgages as something much more than an option of last resort?

Industry Initiatives

For its part, NRMLA has worked hard to provide its members with the resources they need to establish connections with financial planners. Association conferences have featured talks from retirement income experts like Wade Pfau, who has discussed how a reverse mortgage line of credit can enhance financial planning, and Jamie Hopkins, who has offered insights on forging relationships with advisors.

The association has also hosted webinars that discuss strategic uses of home equity in retirement and encourages its members to promote these webinars to their financial advisor network.

Lenders are also working to move the needle.

AAG hosts one-on-one appointments between planners and loan officers, monthly educational webinars and lunch-and-learn events that offer continuing education credits to CFPs. Jesse Allen, SVP of AAG’s National Field Sales channel, says the effort has paid off. “Each of these programs has yielded lasting relationships with planners nationwide.”

Reverse Mortgage Funding has also launched a webinar series on its education platform, Retirement Experts Network. Tom Dickson, who leads RMF’s financial advisor channel, says the series has drawn a national audience of advisors each month and continues to grow.

“The primary objective for the webinars is to deliver topical and comprehensive content from industry leaders and provide continuing education for the financial advisor community.”

RMF is also supporting new research from John Salter, whose influential study on the reverse mortgage line of credit was published in The Journal of Financial Planning in 2012. The research will outline how a HECM could be used to assist seniors looking to downsize.

Dickson says RMF’s efforts have helped the lender build solid relationships with important stakeholders in the FP community.

Finance of America Reverse formally launched its financial advisor program last year and plans to implement a renewed approach in 2017. FAR Chief Sales Officer Sherry Apanay says the success of this movement is critical to the industry.

“Educating the financial planning community is an important piece of continued reverse mortgage acceptance and growth,” she says. “Reverse mortgages have certainly become part of the conversation in a bigger way. Hopefully our efforts, along with the efforts of others in our industry, can help the financial planning community—and ultimately seniors who may benefit from a reverse mortgage—understand whether the product is right for them and how to find a lender they can trust.”

The Funding Longevity Task Force

A significant push for this mission has come from a group of seven financial professionals and academics who have banded together to form the Funding Longevity Task Force. Established by Retirement Funding Solutions’ Torrey Larson and HECM expert Shelley Giordano, the task force aims to promote research about reverse mortgages and their effectiveness in retirement income planning.

Giordano says she and Larson were inspired by research from Barry Sacks and others that appeared in The Journal of Financial Planning in 2012. “We felt that there was more fertile ground to be covered,” she says. “Torrey asked me if we could get a group of thinkers together to meet around the table and come up with a vision that would help us continue to look at housing wealth in an analytic way.”

Giordano says the group works to spread the word by publishing papers, talking to the media, and meeting with members of the financial services industry and regulatory agencies to discuss the role housing wealth can play in funding the retirement income gap.

Task Force member and noted academic Sacks made significant headway in 2014 when he successfully lobbied FINRA to remove its warning on reverse mortgages as an option of last resort. In its revised alert, the regulatory authority says reverse mortgages “can be a useful tool for certain older Americans who might otherwise face losing their homes.”

Recently, the Task Force announced another milestone: a partnership with the American College of Financial Services. With the help of the college’s resources, the two entities will work to expand the body of knowledge related to the use of reverse mortgages in retirement income planning.

Giordano says she thinks the group has achieved substantial success in its four years. “We really feel like we’ve changed the conversation about reverse mortgages in terms of thinking about how to monetize your housing wealth,” she says.

Refining Our Approach

Certainly, some tangible strides have been made, but are we making any real headway? It’s hard to know. Retirement income expert Pfau says he does see some momentum.

“I have noticed a distinct uptick in positive mass media coverage of reverse mortgages as well as a greater understanding among financial planners about their potential use in financial plans for clients,” Pfau says, attributing this development to the efforts of the Task Force. “It is the group that directed my interest to reverse mortgages in the first place. They are very effective in reaching out to planners and other relevant groups.”

Pfau, who recently published a book titled Reverse Mortgages: How to Use Reverse Mortgages to Secure Your Retirement, gives presentations about the product to financial planning groups around the country. “I am finding that more and more advisors are opening to their use,” he says. “Financial Planning Association chapters and other planner groups are reaching out to me to present on reverse mortgages at their meetings.”

Financial advisor Michael Kitces, a sought-after speaker in the financial services industry who writes the popular blog Nerd’s Eye View, is less enthusiastic.

“I think the reverse mortgage industry has had some success in its efforts to spread awareness of the product, but from what I can see, the penetration is very limited at best,” he says.

Kitces says he may have been the first in the advisor community to publish articles about the HECM’s role in retirement planning in 2011, and he continues to believe in its potential. But he says the industry has done a poor job in elevating its image, which has dampened progress. “Too many pushy salespeople, crackdowns on the product to curb sales abuses and late-night infomercials put the reverse mortgage into questionable company.”

To engage financial advisors and get them to see past misconceptions, Kitces suggest originators tone down the sales lingo and assume a more consultative approach.

“Too many reverse mortgage brokers treat the reverse mortgage as a panacea solution for all situations, which is a huge turnoff for fiduciary financial advisors, and makes them distrustful, because no product is always the right answer,” Kitces says. “I regularly see reverse mortgage brokers undermine themselves by pushing too hard like salespeople, and not taking a more objective and consultative approach.”

Pfau suggests originators learn about retirement income planning so they can better speak to these professionals. “This provides a way to help the advisor see how a reverse mortgage can best fit into a financial and retirement plan,” he says, adding that his book can help in this endeavor. “In the book, I explore the financial planning research around reverse mortgage use in order to help planners and sophisticated consumers to better understand how the reverse mortgage tool can add value to a retirement plan.”

NRMLA also suggests that originators educate themselves about trends in financial planning and priority issues for planners. “Learning more about their objectives can help us frame our messaging about why a reverse mortgage can help a client meet their financial goals,” NRMLA spokesperson Jenny Werwa says.

If we can refine our approach, Pfau says he thinks reverse mortgages will eventually gain acceptance. “I expect more planners will embrace reverse mortgages. For several years, Social Security claiming strategies was the hot issue for planners working in the retirement space. But after a change in the Social Security rules reduced some of the planning opportunities, all of that momentum was lost. I think that, slowly but surely, reverse mortgages are replacing Social Security as the hot topic in the retirement world.”

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