Reverse Mortgage Industry: We Have a Financial Planner Problem

After speaking with several financial planners for a recent article on RMD, it became clear the industry faces a serious problem… Financial planners have little to no knowledge about reverse mortgages.

When asked if they had recommendedor would ever recommend—one of these loans to their clients, the first few planners responded negatively, but were largely unable to explain why they gave the response they did.

In most cases, conducting an interview was impossible, because they didn’t know fundamentals of reverse mortgages.

This raised an interesting question: If a financial planner’s job is to advise people on how to plan their finances for the future, how can they give someone good advice if they’re not fully versed on of all the options out there?

Their lack of knowledge could pose a disservice to seniors who may need the product, but are not given the choice.

One financial planner mentioned a limited understanding of the product, focusing primarily on what he “knows” about the “industry’s abuse against seniors.”

While it’s true there have been cases where seniors were taken advantage of, it’s not true of the reverse mortgage industry in general, and it shouldn’t color financial advisors’ perceptions of the product. Instead, it should just remind them to be knowledgeable and informed in their recommendations to their clients.

This advisor, along with another, said cost analyses they’ve run on reverse mortgages never break even, and their situation models are always in favor of either selling the home and using the proceeds toward rent, or taking out a home equity loan/line of credit.

Neither of these options, however, are available for seniors with poor credit. When I mentioned that issue to them, they just said none of their clients have ever fallen into that category. If they were to encounter a situation where a senior happened to be a prime candidate for a reverse mortgage, they probably wouldn’t be prepared on how to advise them.

While the planners I spoke with up to this point seemed entrenched in their negative preconceptions, one conversation pointed to the possibility of turning the tide.

This particular financial advisor had some knowledge of reverse mortgages after looking into the product for her elderly aunt, and was willing to learn more. Through both email and phone correspondence, the questions she asked sparked a dialogue about the loans.

She ultimately decided against a reverse mortgage in her aunt’s case, and had never recommended one to any of her clients, saying the origination fees were too expensive.

I ended up sending an email to the advisor, asking for her thoughts on the HECM Saver program, which has much lower upfront costs due to a lower insurance premium. She called me about an hour later, after looking into the Saver, and said she had previously been completely unaware of the product.

After doing some research, though, this financial planner acknowledged the “plus side” to the HECM Saver, i.e. the lower insurance premium. She said she would “definitely” look at the program if she were considering a reverse mortgage.

While she couldn’t be considered reverse mortgage’s biggest advocate by any stretch of the imagination, progress was made in educating at least one financial advisor…. all with one email about the HECM Saver.

Whether the HECM Saver is the key to reaching this group of individuals isn’t clear, but there is certainly a lack of understanding about the role reverse mortgages could play in the future of retirement planning.

It’s easy to point the finger and blame those who choose not to learn about the program, but maybe the industry needs to turn that finger around and ask, when was the last time I reached out to a financial planner and let them know about the Saver—or reverse mortgages in general?

For me, it was last week. How about you?

Written by Alyssa Gerace

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