Let’s be honest. None of us have the wherewithal to protect every retiree in our city, much less those who live on our block. First, you don’t have the time, and second, you don’t have direct access to that pool of retirees because you’re not privy to their financial status. You’re a reverse mortgage professional; not a financial advisor or accountant.
What we’re talking about is not some new scheme that will somehow boost our personal or collective loan volume to new heights. We’re talking about becoming a relevant part of the retirement conversation and helping real people with real needs that may determine the quality of their life, health, and relationships.
One of those needs is being prompted by the big squeeze, otherwise known as inflation. A mere 10% increase in the cost of living can reduce a portfolio’s longevity for retirees drawing fixed-income investments or savings. That’s a 50% reduction or half as many years that their money will last. Any competent financial advisor knows this and will make excess withdrawals due to inflation a key part of their annual review with clients.
As a financial lifeguard, it’s never fun to tell someone that they’re drowning but they just don’t know it. Yet that’s exactly what many advisors will face in that difficult conversation. Will they tell them they need to reduce their expenses or standard of living? Perhaps, but who really wants that? Will their advisor suggest that they increase their investment returns by taking more risks? Not likely if they have a conscience and any common sense. Will they tell them to go back to work part-time or find ways to generate more monthly income? Perhaps, when it makes sense and their client’s health allows for a return to work.
The more likely strategy financial professional may suggest are to increase allocations of energy, materials, and financial stocks while reducing exposure to retail and consumer service sectors. But even if that works will that strategy generate enough earnings to offset inflation. Likely not. That generally leaves one choice, assets. The question is whether to sell an asset outright or slowly dissipate the accumulated equity. To suggest a retiree sell their home, downsize or rent and invest the proceeds is a bitter pill to swallow. After all, who wants to get rid of the home they worked so hard and diligently to pay down or pay off completely? The home where they feel safe and surrounded by memories.
The more palatable solution advisors can present is an asset dissipation plan. One that avoids selling stocks when their share prices are down as a realized loss. A solution that takes some of the winnings off the table while finding more financial assets to extend or preserve sustainable withdrawals. A typical asset dissipation strategy, often called asset depletion, takes a fixed withdrawal from an account to boost income. But what happens when that asset’s value has been drained? It’s gone. However, a reverse mortgage provides the ability to tap into the value of an asset that typically appreciates and outperforms the market without relinquishing ownership or encumbering other assets as security. Now that’s one strategy that could substantially boost any financial professional’s skillset as a retirement lifeguard. Not only could they prevent their client from drowning, but they could actually give them the means to swim with confidence, or even relax along the sides knowing the lead weight of inflation won’t sink them after all.
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Great vlog!
So what is a lifeguard? Google definitions state that a lifeguard is “an expert swimmer employed to rescue people who get into difficulty in a swimming pool or at the beach.” Could a lifeguard also be a successful chef? Sure but when you are drowning, you won’t care if the rescue knows how to cook and properly present Bison filet mignon! That was not on my mind when drowning in 20 foot waves when I was 12 nor would it be on yours.
To be compete as a lifeguard requires knowing more than how to swim. It does not come overnight. There is work involved. While lifeguard training is not as extensive as training to be a brain surgeon, proper and thorough lifeguard training is crucial in saving the lives of drowning people. Just ask my neighbor who is both lifeguard and fireman for our city’s fire department.
So how does this apply to reverse mortgage originators? Just make sure that when you meet with prospects that you are thoroughly competent in knowing the full array of reverse mortgages. It really does not matter that you are the best in the industry at explaining how reverse mortgages can mitigate the risk of loss from the sequence of returns of a portfolio held in an IRA (especially to a consumer who has less than $40,000 in asset value in the IRA). When it comes to what plan is best for a senior, always defer to his or her competent, knowledgeable, and trained adviser even if you fear that the adviser will kill the deal.
Financial perils have things in common and that can be addressed in lengthy explanations to a prospect but that is not the immediate need. When financial peril exists, time is of the essence as is demonstrating to the prospect how a reverse mortgage might potentially improve their chances of financial survival by providing increased cash flow in retirement. Every reverse mortgage originator should be an expert on this subject.
Remember when it comes to financial advising, it is best to stay in your own lane.