Financial planners are an important referral source for reverse mortgage professionals, and Finance of America (FOA) vice president of retirement strategies Steve Resch has been at the head of the company’s conversations with planners to help them understand how much utility a reverse mortgage could have for improving a client’s retirement.
In this second part of a recent discussion, Resch explains how financial planner conversations about reverse mortgages have evolved in recent years, and how mortgage industry professionals can overcome any intimidation they may feel about approaching planners as potential sources of business.
Chris Clow/RMD: Comparing where we were in 2019 and 2020 when seeking conversations with financial planners, how have they changed? You said they’ve gotten better, but is there any particular way that it has become easier to connect with potential partners?
Steve Resch: Well, I think there’s been so much research that has been published — and thank you to Wade Pfau, Jamie Hopkins and everyone else who has published research. Advisers have read this, and they are hearing the messaging. We’re cornerstone partners with the Financial Planning Association (FPA), where I do webinars for them, speak at their conferences, and they’re starting to hear that message and they’re absorbing it.
One thing about advisers is that they are slow to move, and it can take a while for them to [come around]. Going back to conferences in 2019, we’d be there, and people would come up and say, “What is Finance of America?” And I’d say, “Well, we work with home equity,” and they’d say, “Oh, reverse mortgages,” and then turn around and walk away. And it’s the exact opposite now. … “Oh, reverse mortgages, great. I want to talk to you about this.”
So, the whole tenor of the conversation has changed completely. We are not embarrassed to be there, and hopefully someone won’t be walking away from us. Instead, we’re excited to be there at these conferences, and people are excited to have us, and are walking up and starting conversations.
Clow: What do you think industry professionals should most keep in mind if they want to seek out a financial planner partner?
Resch: I think the biggest thing, and I see this a lot when I talk to industry professionals, is that there’s an intimidation factor about working with the advising community. That shouldn’t be there, because the fact of the matter is [mortgage professionals] have a product that the advisers could use. And I don’t think our industry professionals need to know all of the financial planning applications. The advisers will figure out what to do with it. The advisers don’t know how the program works. We can tell them over and over again, but they don’t know it.
This is where tools — for example, like our Illustrator — come into play. I sit with advisers, and I show them graphically how our story can grow and compound. You can see the light go on in their head. It’s like, “I knew a curve, but I didn’t realize it could [work a certain way].“ And so, I think my message to the industry professionals is, know your product, know how it works and focus on that. You have a unique opportunity to help the adviser bring home equity into a financial plan. And that’s what their conversations need to be about.
Clow: Is that easier said than done? What would be a good first step?
Resch: I’ll go back to how I first got involved in this industry. It was a loan professional who came to me in my financial planning office. He asked me if I could better safeguard or enhance my client’s retirement if I had access to several hundred thousand dollars.
Immediately, my head went to, “Oh my gosh, I have all these clients who don’t have long-term care protection. They don’t have backup funding for poor sequences of returns.“ My head went to all the applications. I didn’t know there was a tool out there that could help me manage those gaps.
So, that’s my message to the industry professionals: Know your product, know it well, know it inside and out, and be able to go to the adviser and talk about a solution that they may have for some gaps in their clients’ financial plans.
Clow: What kinds of steps at the local level can an industry professional take to start being more exposed to the planners around them?
Resch: Well, I think they should all be involved in their local Financial Planners Association. The associations are all over the country, and a lot of reverse professionals are involved in them. The advisers definitely know them — they see them at conferences, luncheons or what have you. So, I think that’s something that you really want to be a part of — your local advising community. The FPA is probably the biggest one throughout the country.
Clow: What did I miss? What haven’t we touched on that you think our industry audience should most know about this topic?
Resch: I think it’s really just understanding, as I said before, how the program works. The advisers have no idea how this program works, as much as we talk to them about it. And then understanding what their needs are as advisers is crucial. A big one is managing long-term care. Another is cash-flow management and paying off an existing mortgage.
To that end, we have seen some restrictions on that because of the changes in the principal limit factor, but it is also a very big opportunity to talk to advisers about eliminating that mortgage payment. Another opportunity is the HECM for Purchase (H4P). Planners often don’t realize that they can use that, and many of us are now dealing with gray divorce scenarios. Another scenario where this really comes in handy is relocation.
Clow: H4P is a much bigger conversation topic these days. How have you seen it become more prevalent?
Resch: I can tell you a quick example. I had a mother of one of my clients. She and her husband had retired to Florida, and they were down there for 15 years. Then the husband died and the mother was by herself. She wanted to move back up north to be near her children.
She had two choices: spend down her invested assets — which were providing her income — to get into the house she wanted, or do a reverse for purchase, leave all her investments alone and let them continue to generate income for her.
Relocating is going to be a big thing, too, because a lot of people have moved to Florida, and when one spouse dies, they move back to be near family. So, I think there’s a huge opportunity there. Gray divorce, eliminating that mortgage payment and managing long-term care risks — those are really, in my mind, the biggest opportunities.
