"HECM Reverse Mortgages: Now or Last Resort?"- Shaun Pfeiffer, Ph.D; Angus Schaal, CFP; and John Salter, Ph.D., CFP, AIFA. (Journal of Financial Planning, 2014).
"The Reverse Mortgage: A Strategic Lifetime Income Planning Resource" - Tom Davison, MA, Ph.D., CFP; and Keith Turner, CRMP (Journal of Retirement, 2015).
"Incorporating Home Equity into a Retirement Income Strategy" - Wade D. Pfau, Ph.D., CFA. (Social Science Research Network, 2015).
Another aspect to this that bothers me a bit relates to clients’ values. Some of the members of the Swiss army seem to think that clients will take the discussion of smart strategic uses of reverse mortgage products as creative, even fun and will view the advisor as an innovative thinker. I’m skeptical about that assertion.
In over a quarter century of working with retirees, I have yet to hear anyone say “I wish I owed money on my house”. Reverse mortgages are different but they are still debt.
A lot of clients will not take kindly to the reverse mortgage concept. Their repulsion stems from their sense of control and independence. An owner of a paid-off home doesn’t answer to a bank or the government in the same way a borrower does.
I always credit former FPA President Elizabeth Jetton with this quote, but I think she got it from Einstein. Anyway, “Not everything that counts can be counted and not everything that can be counted counts.”
There is real and substantial value in the psychological benefits of being debt free even if that value is unquantifiable.
A client who has worked a lifetime to be a retiree sans mortgage may have a hard time getting their head around the idea that they should now use a form of debt that could wipe out the equity. If a smart strategic use of a reverse mortgage could help them given their circumstances, of course, we owe it to clients to explain the reverse mortgage options. Part of acting with integrity is telling people things they don’t want to hear if that’s what they need, but we should also be prepared to receive some negative reactions.
Lastly, I want to bring up an ethics issue. I have attended many continuing education sessions over the years in which a case study of unethical behavior revolved around an “advisor” recommending that a client tap the equity in their home to buy an investment product.