While reverse mortgages have long been a viable option for many homeowners ages 62 and older, the current economic climate stemming from the COVID-19 coronavirus pandemic is leading more consumers and financial professionals to examine home equity conversion to help bridge the gap.

American Advisors Group (AAG) is at the forefront of connecting with financial professionals about the possibilities that can be presented for financial stability in the lives of seniors with access to home equity. The work of debunking myths, providing background and educating the financial planning community about key ways reverse mortgages can assist clients during this time is being undertaken by AAG strategic business specialists Hank Sanders and Ryan Ponsford, each with more than 25 years in the financial services industry.

In turbulent times, clients require access to stable financial avenues they can use to try and maintain their standing even when their finances could be at risk through traditional investments.

The lesson

For financial planners, a HECM line of credit can be particularly attractive since clients can use that reverse mortgage feature to shelter assets from sequence of returns risks during times of market volatility. In volatile times, planners are looking to:

●  Preserve investments

●  Secure cash flow

●  Avoid realizing losses in investment portfolios

●  Bolster emergency reserves

A HECM line of credit can help accomplish all of these goals, through the smart incorporation of home equity into a retirement plan.

The Scenario

To help illustrate how home equity can be integrated into financial solutions, AAG’s team uses examples based on actual cases designed or studied.  In a recent video, Bridge Financing in Turbulent Times, Ponsford and Sanders explain how the HECM Line of Credit grows and provides clients with both certainty and flexibility, freeing up the ability to decide when and how much to pay toward their loan balance, as well as have access to liquidity in the future.  In this current market, providing advisors with resources to enable clients to avoid realizing portfolio losses has proven extremely valuable. 

Why the time is now

The timeliness of the home equity message to financial professional isn’t rooted in the idea that reverse mortgages are more effective right now, but the moment we’re in certainly helps provide context to professionals about how reverse mortgages can be leveraged to help clients, Sanders says.

“What has been shared in the theoretical has now become reality,” Sanders tells RMD. “It continues to be one of the more creative and flexible mortgages in the marketplace, but also remains one of the least understood.”

Nevertheless, the current environment also makes clear the parameters of the new conversation, Sanders says.

“This environment creates the space for conversation around what can we do now, what did we miss, and what can we do to be more prepared the next time,” he says. “In times of uncertainty, one of the greatest characteristics in a financial plan is one with flexibility and the option to adapt.”

Financial planner response

Good planners will always remain interested in ways they can more effectively help manage their clients’ assets and minimize losses, but in addition, the current moment is also allowing more planners to have broader conversations in the first place. This is according to Ryan Ponsford.

“What is unique now is that contrary to what you might expect, [planners] do have time available for these discussions,” Ponsford tells RMD. “Like the rest of us, they are stuck at home, making calls, testing Zoom, homeschooling their kids, adjusting to this environment — part of which has created space to look for proactive ways to help their clients through these uncertain times. From that perspective, they are more receptive.”

When getting their attention on a matter like this, a few things come to mind in terms of what information financial planners are typically most receptive to, according to Ponsford.

“Flexibility, options, certainty, confidence, and bridging the gap through this market,” Ponsford says. “One of the greatest challenges in the reverse industry is that most of the mindset, solutions, and communication comes from the perspective of people with very limited income and assets needing to free up the burden of a mortgage payment. These typically are not the clients reflected in an advisor’s book of business. However, they do have clients that like flexibility and options.”

Getting the word out

For reverse mortgage originators who are looking for ways to connect with financial professionals, AAG has a dedicated team specifically designed to facilitate conversations with new potential referral partners.

“For originators looking for resources, many of their firms have individuals like us on the team, available to lead or support conversations with advisors, run various illustrations, and provide insight into the mindset of external professionals,” Sanders says. “My advice is to use them. Leverage their experience, skill-sets, and knowledge of both industries.”

For originators without those resources in-house, there are other ways to connect with financial planners that they want as referral partners, including plenty of third-party content communicating reverse mortgage benefits that have been created in response to the current situation.

Timing is key

It’s difficult to imagine a better time to connect with potential financial professionals, Ponsford says. Originators and other stakeholders would be wise to take advantage of it, he adds.

“Not only do we all have an immediate conversation starter with the crazy world in which we’re operating, the solutions we can make available are precisely what they need (and should already have had) in place for exactly this economic environment,” Ponsford says. “You can bridge the gap now as well as prepare them for the next event. That said, if you are reaching out to ask for deals to benefit yourself, you are missing the boat. Don’t ask for referrals…earn the right to be introduced as the advisor’s trusted partner. Be a pollinator, not a parasite.”

To learn more about AAG’s resources for business professionals and to access AAG’s reverse mortgage content developed for financial professionals, check out their latest video, Bridge Financing in Turbulent Times: How Can Home Equity Help?