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Reflecting on NRMLA Western Regional Meeting
National Reverse Mortgage Lenders Association Meeting
It’s hard to put a finger on at times. Do we find ourselves merely observing events in our industry or are we actively engaged in the battle? The trick is to separate what we can control and with the rest merely absorb the information and move on. Fighter pilots have a term for this when flying called “situational awareness”. The ability to process a flood of information while prioritizing and acting on what is most important. This skill is especially important for you the reverse mortgage professional dealing with vast amounts of information where decisions have lasting consequences.
I found this critical skillset amongst colleagues at the NRMLA Western Regional Meeting in Irvine, California last week. Each person I spoke with had processed the recent changes and challenges but had a clear focus on what their next steps were. When change is rapid we have a limited amount of time to process it and to decide on the next course of action. It was encouraging to see that productive and skilled reverse professionals are always in demand…even in a contracting market. Remaining lenders are now looking to expand to absorb the marketshare left in the wake of large lender exits.
The meeting in Irvine left me pondering a few things…our destiny and potential. In speaking with two national figures the phrase “demographics do not equal destiny” was repeated. What demographics? The huge potential market of retiring baby boomers who find themselves in need of funds to finance longevity. I agree that potential markets themselves do not insure our growth. Our industry has to ‘mind the store’ while looking ahead to it’s potential. Our first task is to prepare for regulation and then protect our industry reputation. NRMLA’s “Borrow with Confidence” campaign is a step in that direction. Beyond that, it comes down to each of us policing our own industry and personally striving for the highest standards of ethics in offering products and serving senior homeowners. It boils down to the golden rule.
Potential For Growth In The Reverse Mortgage Industry
The potential for future growth reaches beyond the retiring boomer. It also lies with the financial planner. I was able to attend a session with two financial advisors who see the reverse mortgage as a planning tool. I took away a few things. One, originators must avoid trying to sell the HECM as a panacea or “fix all”. It’s a tool for a select group of retirees. Overselling the product is a sure way to kill any future partnership with a financial planner. Second. Describe the ideal client. Financial advisor Pat McClain of Hansen McClain in Sacramento California elaborated. He said to plant the idea of looking for clients “who are currently withdrawing 8% or more of their portfolio each year”. Why? That rate of withdrawal is unsustainable and other assets must be explored before the fund is exhausted. I agree. He also added that many retirees knowing their portfolio won’t last with current distributions may come back a few years later more open to the idea of using other assets like home equity.
The Positive Future Of The Reverse Mortgage Industry
I am encouraged. Today I see more educated and informed professionals in our industry than just four short years ago. That said, those who will continue to thrive will have the skill of situational awareness. Absorbing present changes and regulation while focusing on the present and future. Our industry is poised for explosive growth in the years to come. Which year will that begin? I don’t know. In the meantime let us continue to improve and expand our skill set and develop situational awareness which will serve is well today and in the years to come.
5 Comments
I agree financial advisors can be an important link in the value chain. However, only a small percentage of the boomer and retiree community is served by advisors and, for the middle market, that percentage is miniscule. My efforts are focused on developing more institutional approaches to integrating housing wealth into retirement income management and believe significant headway will be made in the intermediate term. Happy to discuss ideas.
Dan R. Osterhout
Dan,
I agree. It is a small percentage of the boomer community served by FA’s and even a smaller percentage of those using a FA that would be the ideal client for a HECM. Thank you for your ideas. Hopefully soon reverse mortgages will be built into financial planning software used by advisors.
Dan, I would love to hear some of your development ideas – what you’ve used, what you are planning to use. THANKS for the offer.
To be clear there are fewer CFPs nationally than licensed California CPAs. Real estate licensees in California outnumber CFPs nationally by a ratio of 6 to 1.
As to a group, CFPs are relatively small but their influence in the financial industry far exceeds their small numbers. For example, Mr. Harold Evensky, is considered the Dean of Financial Planners nationally. Most CFPs not only influence their client base but also client family members and have a very large sphere of influence than their mere numbers might indicate.
Perhaps Mr. Osterhout would go into more detail with us in this thread or cooperate in writing an article with Mr. Shannon Hicks in the next month or so.
Well said.
For years there was a false presumption that more seniors in the US population equated to more originations. That false promise has been held out as a principle in gaining more originations in our industry for decades now. Some of these advocates placed little to no value in the concept that home appreciation plays a very significant role in the ability of the industry to grow. Many of those who ignored the important role home appreciation plays in the origination decision are very disappointed and disillusioned with the industry today.
Unfortunately in the media there is still a very false belief that originations are on the rise and thus regulation is a necessity. This concept has even flowed over into the idea that younger HECM borrowers are getting HECMs like never before. Well, the facts are, the actual number of new younger HECM borrowers are lower today than during fiscal 2007, 2008, or 2009. In fact the growth in the percentage of younger borrowers is very much reflective of the lower average age of those over 62 than most seem to recognize.
After years of a sleepy industry, change is beginning to be seen. Keeping aware of change is at a very pleasant pace currently. No doubt the pace will accelerate in the years to come.
One of the situations we need to be aware of is the broader acceptance of HECMs by both real estate licensees and financial advisors. Those who have not geared up or are not gearing up to meet with these individuals will miss a wider opening into the clients these industries service. Yet in no way will the addition of these two potential sources harm or otherwise, interfere with our need to continue to reach our traditional senior base.