Although he wasn’t named in the post, the story was about Zack Alkhamis, a financial advisor with Retirement Wealth Management Group, who has been helping clients manage their finances for 28 years in Kalamazoo, Mich.
Alkhamis directed a client to a local reverse specialist to learn more about how it might improve the client’s situation. That specialist included Alkhamis on a follow-up e-mail with the client, which contained a proposal for a reverse mortgage. In a routine audit months later, that e-mail was flagged.
“Two weeks later, I received a letter from our compliance department. It was basically a slap on the hand, disciplinary action for discussing Reverse Mortgages with a client,” said Alkhamis, who contested the $350 fine to no avail.
“I will always talk to clients about reverse mortgages, because I’m a fiduciary and a Certified Financial Planner,” Alkahmis says. “If I know of a product that helps my clients have a better retirement, I will talk to my clients about it. I don’t answer to compliance, I answer to my clients. It’s the right thing to do.”
Alkhamis says he will continue to suggest that clients look into them when the situation calls for it, but he will be careful not to leave a paper trail, as a second citation would likely mean an end to his relationship with his broker-dealer.
Alkhamis’ story ignited a heated discussion among professionals across the industry, many of whom shared their own stories of compliance shutdowns and expressed frustration with what appears to be a widespread institutional roadblock among the financial planning community.
“Weekly we hear that [broker-dealer] compliance officers forbid discussions on housing wealth in retirement planning,” wrote Shelley Giordano of the Funding Longevity Task Force in the post that brought the story to light. “Instead of formulating policies and procedures to ensure clients use their housing asset prudently, many BD compliance officers routinely insist on a total blackout on the issue.”
The compliance teams at many of these large firms spend a great deal of time combing company emails for violations, Giordano says. The phrase “reverse mortgage” is often flagged, she says, and there can be repercussions for the advisor.
“The industry has spent enormous amounts of time and effort on this,” Giordano says. “And we are increasingly meeting less resistance from the individual financial advisors, only to be thwarted by their firm’s policies, which say they can’t even have a discussion about a reverse mortgage.”
Chris Bruser, a Certified Reverse Mortgage Professional with Retirement Funding Solutions who has been working with financial planners for years, says he has been told by advisors on several occasions that their compliance forbids them from discussing reverse mortgages with clients.
Bruser says this is particularly troubling in light of the increasing amount of research pointing to the importance of home equity in retirement income planning.
“It’s even in the curriculum at the American College!” Bruser says. “I think you’ve got to say, ‘Hey, take a look at this research — something’s got to change here.’ How can you hold yourself out as a comprehensive financial planner if you’re ignoring people’s largest asset? You can’t be.”
Giordano says something has to give: “Enough is enough. Tell us why there is this blackout on information on reverse mortgages, especially in light of the research that’s been done.”
RMD reached out to five leading broker-dealer firms for clarification on their policies regarding the recommendation of reverse mortgages.
Edward Jones was the only firm to reply, stating that it didn’t have an official policy just yet, although “it is something we have been researching and following as a firm,” a media rep wrote in an e-mail to RMD. “It’s up to each of our financial advisors to discuss the options that are in the best interest of our clients.”
Representatives at Raymond James, LPL Financial, and Lincoln Financial declined to comment, while Ameriprise failed to respond.
Jamie Hopkins, a professor at the American College of Financial Services, says the reason behind this widespread institutional blackout is multilayered.
“Some of this is driven by misconceptions, old information, and a general compliance mentality,” Hopkins says. “Some of these concerns are also based on the fear of being unable to monitor churning or cross-selling issues. Some also worry that their employees are not properly trained or educated on reverse mortgages, and should therefore be wary about allowing them to move forward with any serious discussions.”
“Compliance has a job where protection is paramount,” Hopkins says. “Their job is not at its core aimed at doing what is best for the consumer, but instead at protecting the company.”
But Hopkins says that while there are a number of firms that ban the topic, he has seen the tide begin to turn.
“The restriction on reverse mortgage discussions and planning is widespread across the financial services industry, but in the last few years, there has been greater adoption and advancement in allowing discussions,” he says.
Written by Jessica Guerin
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