Advisers best distribution channel for reverse mortgages
In a solid endorsement of the financial planning profession, the Institute of Actuaries of Australia has said that consumers are best served by consulting a financial adviser and not a mortgage broker when looking to buy a reverse mortgage product.
“The majority of reverse mortgages at the moment are sold by mortgage brokers. The fact is they are not regulated under financial services regulations, they do not have to meet the minimum training and competency requirements financial planners do, and, to be frank, they are generally not trained in how to integrate a reverse mortgage into someone’s financial plan,” Institute of Actuaries of Australia councillor Steve Schubert explained.
“Mortgage brokers are not well equipped to help you decide whether a reverse mortgage is right for you, and if so, what type of reverse mortgage you want to be taking out. Financial planners are arguably better equipped to do that because they are more used to looking at the whole of someone’s circumstances in their retirement planning,” he added.
The actuarial professional body also feels the industry sector body for the reverse mortgage market, the Senior Australians Equity Release Association of Lenders (SEQUAL), can strengthen the measures it currently has in place to protect consumers.
At the moment, SEQUAL employs a code of conduct for the industry that only provides strong encouragement for consumers to discuss reverse mortgage transactions with their families and seek independent financial advice.
However, it does insist people receive legal advice to ensure an understanding of the contract before it is entered into.
The Institute of Actuaries believes SEQUAL should treat financial advice in the same way it treats legal advice and make it compulsory for people in the market to obtain.
“Legal advice and financial advice are quite different. The legal advice will take you through the contract terms, but won’t necessarily take you through the implications. It will not involve assessing your needs and it won’t involve assessing what risks you’re taking in entering a product,” chair of the Institute of Actuaries taskforce on reverse mortgages Paul Swinhoe said.
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