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Reverse mortgages finally make headway with financial advisors

One broker-dealer now permits discussions about the loan. Will others follow suit?

Reverse mortgages are often touted as a financial planning tool that can be used strategically to boost one’s income in retirement. But getting through to the financial advisors who work with planning-oriented consumers has been difficult.

Across the financial planning world, there has been a widespread institutional blackout on any discussions related to a client’s housing wealth, including the use of reverse mortgages.

Concerned about compliance implications and colored by misconceptions about the product, broker-dealer firms have banned their advisors from talking about it, even going so far as to penalize those who do.

An advisor from Michigan made headlines last year when was fined by his broker-dealer for advising his client to look into one – sparking a debate among financial planning experts and reverse professionals about the validity of this conversation.

Many pointed out that the ban was in glaring opposition to a rising movement within the financial planning world that focuses on the use of housing wealth in retirement income planning. After all, it is known to comprise a significant portion of a retiree’s overall wealth.

The Journal of Financial Planning, Forbes and a number of well-known researchers have explored and validated such strategies.

Now, it seems some broker-dealers are finally listening.

HousingWire has learned that Tampa-based firm J.W. Cole Financial has officially lifted its ban, putting parameters in place for advisors who wish to explore the use of a reverse mortgage with clients.

In order to gain the firm’s consent, advisors must pass the Department of Housing and Urban Development’s exam for approved HECM counselors, according to an internal document obtained by HousingWire. When they present their certificate of completion to their compliance team, they will be given guidelines on the dos and don’ts of this discussion.

While J.W. Cole declined to comment, Curtis Cloke, an advisor who works with the firm, confirmed the new guidelines.

Cloke, the founder and CEO of THRIVE and a well-known speaker in the retirement income world, said reverse mortgages are finally gaining acceptance in the financial planning community.

“I think 2018 was a pivotal tipping point where the industry has recognized that 50% of the average retiree’s wealth is in their home,” Cloke said. “It’s such a large piece that we can’t ignore fiduciarily.”

“I think once the industry recognizes that somebody has found a way to do this without a liability threat – which everyone has feared and used as an excuse not to go here – then I think the personal biases and compliance problems that have been behind this resistance will start to fade,” he continued.

Cloke said he expects to see other firms follow J.W. Cole’s lead.

“I think the heavy lifting may have been completed, and now that word is out, we may just have to give it time and keep the message alive,” he said.

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