When asked to serve as a sponsor at a recent retirement strategies event hosted by TheStreet, Finance of America Reverse (FAR) saw a unique opportunity to discuss ways in which home equity could be implemented into retirement strategies.
What FAR Vice President of Retirement Strategies Steve Resch did not expect, however, was the positivity he felt after having conversations with both financial professionals and the embedded consumers of financial products in attendance that were able to have high-level financial conversations.
“I spend most of my time talking to financial advisors about [incorporating home equity],” Resch told RMD in a phone interview. “And there’s been an enormous change in the past two years as to how they receive the message that we’re sharing with them. What was nice about this conference is that not only were there financial advisors in attendance, but also consumers.”
High-level, affluent consumers
The event, the Retirement, Taxes & Income Strategies Symposium, was held in New York City on April 6. It included financial professionals and consumers from all over the United States, with Resch describing a couple who even came from California to attend.
Among the consumers in attendance at the event that surprised Resch most were those he described as the biggest “fans” of the financial world, who read many of the financial services industry’s regular publications and stay up-to-date on what the industry’s biggest players discuss through their media outlets on a regular basis.
“These are consumers who follow [TheStreet co-founder and celebrity financial analyst] Jim Cramer, and are very into doing their own investing,” Resch says. “They’re higher net worth people, and many of them came up and talked to us about reverse mortgages and were saying that they’d heard more and more positivity about them, and wanted to know how they worked.”
This led to discussions detailing multiple use scenarios of the product for those with ample financial resources—uses like getting rid of a forward mortgage payment to focus some cash on the construction of a vacation home.
“[We discussed] more proactive, positive uses for home equity rather than someone being broke and needing money,” Resch says.
Proactive uses of home equity, and the untapped affluent senior
In one case, an attendee was taking a 6% asset distribution in part to cover a costly mortgage payment.
“Now, these people aren’t broke,” Resch explains. “This couple had $2 million in invested assets. […] So, simply by eliminating that mortgage payment, we’re able to reduce the asset distribution rate down to about three-and-a-half percent, which helps the assets to continue to grow and provide longevity to the estate.”
The concentration of affluent seniors that Resch encountered helped emphasize that the reverse mortgage industry could potentially be missing a substantial source of business by not focusing marketing efforts on them, a position that Resch has held for a long time which also echoes the thoughts of other professionals in the field.
“I’ve been saying all along, they’re reflective of what I think is an enormous market that we haven’t really been looking at,” Resch explains.
By implementing home equity as part of a comprehensive retirement plan on the part of mass affluent borrowers, the industry will tap into a resource that may find a lot more harmony for home equity if they fold it into their existing assets.
“These are people with invested assets, really, of up to $2 million, and there are 21 million boomers that fall into that category,” Resch explains. “That’s an enormous marketplace, and they’re the ones who are doing their own research as they approach their 60s.”
Burgeoning proprietary conversations, an ‘exciting period’
Some of the conversations Resch had at the event also concerned an increasing interest in proprietary products.
“People were interested in proprietary products, and there are so many coming out now that have both no and low closing costs, which is an attractive factor,” Resch said.
Overall, the fact that people were so happy to discuss proactive ways to implement home equity into larger retirement strategies, on the part of both financial advisors and consumers, helped lift Resch’s spirits about the future of the reverse mortgage industry as a whole.
“This was a nice opportunity to talk to consumers as well as advisors, and it’s just really nice to hear that they are getting the message,” Resch said. “I think that shows that we, as an industry, are doing our job. It’s a slow grind, but I think it’s going to move much faster as demographics push it.”
The conversations he had made him feel that the industry is doing its job in addressing members of both the advisor and consumer communities in relating a positive message concerning home equity’s incorporation into a retirement strategy.
“I think we’re on the cusp of a really exciting period, and I’ve noticed a dramatic change in conversations over the past two years,” Resch says. “I think it’s only going to be getting better from here.”
