FP Canada held their annual Financial Planning Conference from November 22-24. The virtual event drew over 2,000 attendees from across the country, providing financial planners, industry leaders, and more with the opportunity to network, learn, and share ideas.

In the spirit of the event’s theme of Connect, Grow, Achieve, we wanted to share some valuable insights from the session that HomeEquity Bank proudly sponsored about leveraging home equity as part of your financial planning. Hosted by Assistant Professor Dr. Pawan Jain and Associate Professor Dr. Vishaal Baulkaran, the session focused on research conducted through the University of Lethbridge on options for leveraging residential home equity.

In their analysis, Dr. Jain and Dr. Baulkaran highlight that a lack of knowledge and perceived complexity of HER products deter financial planners and consumers from utilizing them.

Dr. Jain shared findings from a financial planners’ survey on options for leveraging residential home equity.

• 53% of financial planners would use selling investments as their first choice for meeting their client’s additional income needs.
• Most financial planners were familiar with all home equity release (HER) products. However, they typically would recommend HELOCs and downsizing to their clients. On the other hand, most financial planners also considered HELOCs and downsizing as potentially harmful and costly for their clients.
• Most financial planners felt that they had a high knowledge of HER products. However, a literacy test showed some mismatch between financial planners’ perceived understanding of the product and their actual knowledge, especially for HELOCs, reverse mortgages, and traditional mortgages.
• Most financial planners stated that a reason for not recommending HER products to their clients is the complexity of the products.
• Financial planners tended not to recommend HER products due to behavioral biases such as herding, where they were hesitant to recommend options different from everyone else. In their analysis of the consumer and financial planner surveys, Dr. Jain and Dr. Baulkaran found that a lack of knowledge and the complexity of home equity release products are a barrier to using them.

Dr. Baulkaran shared findings from a consumer survey on options for leveraging residential home equity.

• Consumers generally are willing to access home equity products for retirement funding. This is even more prevalent for males, urban consumers, and non-retired individuals.
• 28% of respondents feel their savings will be an extra source of income during retirement. 20% believe selling and downsizing can be a source of additional income. However, only a very small percentage of respondents felt that HER products, such as reverse mortgages (6%) and HELOCs (7%), could be a source of extra income in retirement.
• 44% of respondents felt HER products would not play any role in funding their retirement. On the other hand, only 19% thought they would play a primary role, and 11% felt they would play a secondary role.
• The primary reasons individuals would use HER products to fund their retirement were to pay for support services or living expenses.
• The number one reason respondents cited for not using HER products for retirement funding was a lack of knowledge of the product and the belief that it was too complex. Consumers feel that if HER products were cheaper or recommended by a financial planner, they would be much more attractive.

These findings show that there is still some work to be done to help financial planners and consumers better understand how HER products work. A great place to start is reading Home Run – The Reverse Mortgage Advantage, written by HomeEquity Bank President & CEO Steven Ranson and EVP, Marketing & Sales Yvonne Ziomecki.

Unlike a regular mortgage or HELOC, the loan on a reverse mortgage does not require the homeowner to make regular mortgage payments and is repaid only when the homeowner no longer lives in the home. Homeowners can leverage the equity in their home using a reverse mortgage product like the CHIP Reverse Mortgage from HomeEquity Bank as part of their financial planning and pay off debt, renovate their home, or make a large purchase, to name a few.

At HomeEquity Bank, we understand the challenges wealth professionals may face in providing their 55+ clients with solutions that meet their individual needs. That’s why we work hard to offer the tools, resources, and support you need to grow your business and explore all financial options for your clients. To learn more about how HomeEquity Bank can help, visit our Wealth Page or find a BDM near you.