Reverse mortgages were introduced to help older adults afford to stay in their homes as they age. But a lack of regulation early on allowed some bad actors to exploit vulnerable seniors and gave rise to a negative public opinion of the product.
The rules surrounding the product have been strengthened over the years and it has since been heralded by experts as a smart financial planning tool, but the stigma continues to haunt the industry.
It’s not surprising that this complicated financial tool is often misunderstood by consumers. But it is surprising that many financial professionals harbor those same misconceptions.
The American College of Financial Services has set out to change that narrative.
A non-traditional higher learning institution solely devoted to the academic study of financial services, The American College is well-known as a resource for those in the financial planning community.
The Pennsylvania-based college has been working toward advancing reverse mortgage education for the financial planning community with a program designed to better educate financial advisors about comprehensive retirement income approaches, including reverse mortgages.
It’s called the RICP program, and it aims to address reverse mortgages in a way that focuses less on the past and more on the best ways to implement the product moving forward. Since it was established in 2012, 5,500 advisors have graduated with the RICP designation and nearly 11,000 students are currently enrolled in the program.
“We focused our attention on the research of how to best use reverse mortgages in a retirement income plan and started doing additional research to further explore best practices,” said Jamie Hopkins, director of the New York Life Center for Retirement Income at the college. “In the end, the RICP helped advance the reverse mortgage product’s acceptance by financial advisors and financial service companies by keeping the focus on improving client outcomes.”
Since home equity remains the single largest asset for most Americans, Hopkins believes reverse mortgages can play a significant role in retirement income planning.
“It is simply just too important to be ignored,” Hopkins said. “The research around reverse mortgages and retirement income planning shows not only that it can be a useful product, but that in some cases it might be the difference between running out of money and living a financially secure retirement.”
Despite the college’s push, Hopkins said he doubts if reverse mortgages will be fully embraced by the Baby Boomer generation.
“The reality is that very few financial advisors do comprehensive retirement income planning today,” Hopkins said. “It is very hard to use a reverse mortgage in its best fit unless you are practicing comprehensive retirement income planning for a client.”
To remedy this, The American College partnered with The Funding Longevity Task Force in a mission to expand its reach and educate the larger financial planning community about reverses. The goal is to improve the financial advice being offered to Americans about their retirement income security.
“The college and its members have truly moved the needle on retirement income planning, changing the way the product is utilized and have jump started the conversation about responsible retirement income planning and home equity,” Hopkins said.
In order to change the fate of reserve mortgages, Hopkins said he believes the burden lays not only on the shoulders of lenders, but on the backs of researchers, academics, financial advisers and clients interested in the strategic use of assets in retirement.