Does suggesting a reverse mortgage conflict with my fiduciary duty to a client?
The short answer
Generally, no. Acting in a client's best interest means looking at every resource they have, and for most retirees the home is the biggest one. What matters is how you do it: document the analysis, compare alternatives, avoid any compensation from the lender, and let the client decide. The Mortgage Advisory never offers or accepts referral fees and provides written numbers you can keep in your file. Check your own firm's policies too.
Why can considering home equity be part of the job?
A retirement plan that ignores the client's largest asset may be incomplete. For a client who is house-rich and cash-poor, or who faces a down market early in retirement, the home may be the most powerful tool available. Asking the question isn't a conflict; skipping it may be a gap.
What would create a conflict?
- Getting paid for the referral. We never offer or accept referral fees, or anything else of value for referrals, so there's nothing to disclose from our side.
- Using loan proceeds to buy a product you sell. We never recommend using reverse mortgage proceeds to buy annuities, insurance, or investments, and some states restrict it.
- Steering the decision. The client and family decide, after independent counseling for a HECM.
How should I document it?
- The client's goals and why home equity came up
- The alternatives considered, like downsizing, a HELOC, selling investments, or doing nothing
- The lender's written numbers and costs
- The client's decision, and who took part in it
What about my firm's rules?
Every firm is different. Many broker-dealers and RIAs want to know about outside relationships and review any materials you share with clients. Check with your compliance team; we'll send materials early so they have time to review.
Our take
I'm not your compliance officer, and this isn't legal advice. But in more than 25 years, the best planners I've worked with treat the home as part of the balance sheet, document their thinking, and let the client decide. That's exactly how we work, too.
Ace Ausar, Mortgage Banker · NMLS #1143018
The Mortgage Advisory, Inc. · NMLS #1549739
Reviewed by Ace Ausar, NMLS #1143018 · Updated
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