The prevailing tendency among financial services professionals to overlook the integration of home equity planning or reverse mortgages into their practices is, in my perspective, a notable shortcoming. The omission of home equity and reverse mortgages from the financial planning process arguably stands out as the most significant failure within the current state of the financial services profession.

Financial professionals bear the responsibility of improving their clients’ lives, and those purporting to act in their clients’ best interests should seriously consider incorporating home equity and, consequently, reverse mortgages into their practices when delving into retirement income planning. An adherence to a best-interest model mandates a comprehensive review of factors that could reasonably impact any recommendation. The home, whether involving a potential reverse mortgage or an existing forward mortgage, undeniably emerges as a crucial factor deserving consideration in evaluating a client’s financial plan.

In reality, a home represents too substantial an asset to be disregarded in financial planning, often ranking as the largest asset for many clients. Moreover, concerning retirement income planning, existing mortgage payments or a strategically employed reverse mortgage could stand as the most significant cash flow elements for a retiree.

This raises two pivotal questions for financial advisers: 1) Is it rational to overlook the client’s largest asset when formulating a financial plan? and 2) Is it rational to neglect a government-insured mortgage product that could substantially improve the client’s situation? The probable answer to both questions is no. Ignoring the home as an asset and a reverse mortgage for retirement-age homeowners is not a reasonable approach.

In bypassing home equity and the benefits of a reverse mortgage, advisers might be placing clients in a more precarious situation than if it were merely an error of omission. Failure to plan or consider available options can lead to liability, echoing past issues with long-term care planning. Similar to how advisers eventually embraced long-term care planning in their practices, a comparable shift might unfold with home equity planning and reverse mortgages, potentially becoming more integral to financial planning than long-term care.

While advisers need not universally endorse reverse mortgages for all clients, they should possess a thorough understanding of the product and be familiar with research

findings from experts like Wade Pfau and Barry Sacks, emphasizing the advantages of integrating a reverse mortgage into a retirement income plan. Regulatory bodies, including the Financial Industry Regulatory Authority Inc., recognize reverse mortgages as a valuable planning tool in specific situations, urging advisers to explore this option.

In an environment marked by increasing liability and expanding fiduciary responsibilities, advisers can no longer afford to disregard the potential benefits of home equity and reverse mortgages. Despite challenges such as compensation models, lack of education, and compliance policies, a commitment to clients’ best interests necessitates a paradigm shift in the financial advisory landscape toward embracing home equity and reverse mortgages.