Canadian reverse mortgage company Bloom Finance Company, Ltd. entered that nation’s reverse mortgage market last fall as a fintech company based in Toronto, Ontario. One of the ways it has sought to differentiate itself from its competitors is due to its status as a tech-focused company on the back end of the loan. It is also only the third major reverse mortgage provider in its country, expanding a market that has room to grow.
The company recently announced that it is expanding its business footprint from the nation’s most populous province, Ontario, to the third-most populous province in British Columbia (B.C.). B.C. neighbors Washington state to its south, and like the American Pacific Northwest has seen significant home price appreciation with average values outpacing the national average.
To get a sense of the competitive lessons Bloom has learned before and after its expansion, RMD sat down with the company’s founder Ben McCabe who has also revealed that in addition to carving a place for itself in the Canadian market, discussions with American reverse mortgage providers have also revealed some interesting truths about the nature of reverse mortgage business which equally apply to both countries, McCabe says.
Collaboration with the U.S. market
Since Bloom entered the space late last year, it has had two-way conversations with American reverse mortgage providers. While McCabe didn’t specify the companies he’s been talking with, he describes the dialogue as constructive, and informative in tone.
“We’re in active dialogue with a number of US players, just giving them an update about some of what we’re up to and trading notes,” McCabe says. “I think one of the advantages that we might have in the Canadian market relative to the US, obviously there’s a lot of flexibility around these proprietary products in the US. But, we don’t have the equivalent of a Home Equity Conversion Mortgage (HECM).”
The Canadian market is also far less populated in comparison with its American counterpart, but that also plays into the regulatory landscape which tends to operate a bit differently. On top of that, the Canadian government is not involved with the nation’s predominant reverse mortgage offerings, McCabe explains.
“Because there isn’t the equivalent of the Federal Housing Administration (FHA) that is dictating all these different dynamics, I think we have some more flexibility to be more potentially creative in terms of product structure and process,” McCabe says. “Because we work with regulated financial institutions, our regulator [the Office of the Superintendent of Financial Institutions {OSFI)] has a look-through to us. So, we obviously need to make sure that we’re doing our business to that regulatory standard.”
Technology as a differentiator
At the same time, however, being creative in the market is one of the things that conceivably helps Bloom to stand out in its own country. McCabe describes Bloom as a fintech company, but much of that is because of back-end loan processing as opposed to consumer-facing interactions.
“We don’t put a very ‘tech-forward’ solution to customers, we primarily utilize technology in the back-end to reduce the amount of work that they need to do to get a loan from us,” McCabe explains. “Basically, we use technology to cut down on user-entered inputs to basically zero, and to cut down on kind of the paperwork that we require from them. So, rather than them having to send us paperwork, we can just get their consent to access their information in other ways.”
Bloom also makes use of no-touch appraisals to minimize the need for others to enter a client’s home. The incorporation of technology on the back-end side of the equation simply adds to an experience that Bloom hopes is reflected in a positive customer experience.
“We think about using technology primarily in the back-end to make it such that the 90% of the conversations that we’re having with customers consist of them asking us questions, not us asking them questions,” he says.
Universal reverse mortgage truths: customer experience and education
While the details of each respective reverse mortgage market are pretty different, McCabe does feel that there is at least some commonality that can be shared between both nations’ respective businesses. In the end, it comes down to how well the client is served, he explains.
“What our key learning has been is that there is very much a path to differentiating and winning in this market on the basis of customer experience,” he says. “On the basis of creating the most elegance, the simplest, and most frictionless customer experience possible. Rates, loan-to-value ratios and fees are certainly important in the customer decision. But, one of the things that we’ve found is that the ability to provide a simple, elegant, friendly and comfortable customer experience — end-to-end — can be a winning proposition in this market.”
Similarly to the US market and its competitors in Canada, Bloom has been seeking out ways to most efficiently educate its potential clients about the applications of reverse mortgages, McCabe says.
“Education continues to be one of the one of the main things that the players in the market are continuing to focus on,” he says. “Talking to customers, explaining the product and helping them understand whether or not it’s the right solution for them. What I would say is that I have noticed a significant shift in the last number of years in terms of media attention in Canada around this product. Generally speaking, nine out of 10 pieces of media that I’ve seen in Canada in the last number of years focused on reverse mortgages have been overwhelmingly positive.”
That comes with the caveat that many such pieces of coverage often qualify that it’s not a product that works for everyone, but it is nevertheless seen as a sign of progress.
Financial advisors and the reverse mortgage business
McCabe also explained last time he spoke with RMD that the focus the American market has on courting financial planners is something he would seek to do in his business, and that initiative has also seen progress, he says.
“We’ve definitely started our outreach efforts with respect to financial advisors, people in the wealth management community, and I think we’re getting we’re getting great reception as we talk about the utility of this product within clients’ financial plans,” he says.
As more people begin to look at where the highest concentration of wealth is for the majority of senior homeowners, the equation is not difficult to solve regarding a largely untapped asset, he says.
“I think that everybody’s just realizing — as they look at how disproportionate the amount of wealth in home equity is related to other parts of the retirement portfolio — that if you’re giving financial advice to seniors, it’s incumbent on you to consider accessing some of that home equity as part of enhancing quality of life and ensuring the person is living the retirement that they can truly afford.”
