For reverse mortgage professionals, a financial advisor remains an ideal referral partner: their clients are likely to have more assets and potentially higher levels of home equity, and could use a reverse mortgage loan as more of a retirement planning tool as opposed to a “loan of last resort.”
But not all financial advisors are open to the idea of connecting with reverse professionals. This fact was further established in a recent column published by Financial Advisor magazine, which took a closer look at the “complex truths” of reverse mortgage loans.
Reverse mortgage products tend to be viewed more favorably by economists when compared with financial advisors, according to Michael Finke, Frank M. Engle chair of economic security at The American College of Financial Services in King of Prussia, Penn. Over the years — most particularly since the aftermath of the 2007-08 financial crisis — reverse mortgages have seen new safeguards and consumer protections added by federal regulators, including the Consumer Financial Protection Bureau (CFPB).
These new safeguards have turned reverse mortgages into “a safe, transparent, and versatile personal financial management tool,” National Reverse Mortgage Lenders Association (NRMLA) President Steve Irwin told the outlet.
Finke opined that reverse mortgages could be a tool that could help borrowers have a more sustained retirement.
“Failing to tap home equity means leaving joy on the table for a retiree who doesn’t have a strong desire to leave wealth to others,” he told the outlet.
Another planner said that the product could help extend the longevity of retirement savings, but the financial planner profession also maintains serious doubts about the utility of a reverse mortgage according to Brian Leslie, director of financial planning at Edelman Financial Engines in Omaha, Nebraska.
“We consider reverse mortgages to be an arrow in the quiver, but not the first one we would pull out,” Leslie told Financial Advisor. “Too often, folks are considering reverse mortgages because they aren’t willing to address the root of the problem, which is they aren’t on a sustainable spending path.”
Poor spending discipline and high upfront costs and fees make the prospect far less desirable, he added, particularly if a borrower is unable to maintain the upkeep of the home.
But Wade Pfau, founder of RetirementResearcher.com and a reverse mortgage author, said that the products are best used “as part of a responsible plan, and not as a last resort.”
