By JAMIE HOPKINS
Generally financial advice in the United States has been siloed, fragmented and often product-driven. Over the past 80 years, the development of financial advising has been a slow process, sped along by a few major technological advancements.
Today, most financial advisors are still doing fairly limited “comprehensive planning.” This in and of itself is not a bad thing; it is a perfectly acceptable business practice to focus on planning and then an area of specialty. Planning is so complex, however, that providing comprehensive advice can range from education funding assistance to investments, insurance, risk management, insurance, business planning, retirement planning and even behavioral coaching.
As such, industries and professionals have developed expertise across these wide-ranging and disparate specialties. But, until now, consumers have struggled to find a mesh of services that combine these offerings from one professional. The matter is then further complicated because there are minor marketing and positioning battles occurring between the different industries. For instance, those that hold themselves out as financial planners, like CFPÒ’s, attack the high cost and complexity of insurance products. The insurance world then criticizes others for being too investment-focused, by placing clients in risky investments that don’t bring the security of insurance.
So, when Professor David Littell was charged with building a Retirement Income Program to educate financial services professionals across all disciplines, he took what can only be described as an agnostic approach to products and strategies. The resulting program, the Retirement Income Certified Professional® (RICP) has now reached nearly 20,000 financial service professionals at some level. The program includes research and information on mutual funds, individual stock investments, active management, passive, taxes, qualified plans, executive compensation, long-term care, insurance products, annuities, secondary markets and home equity.
When I was brought in to help Professor Littell build out this program, he instilled an open-minded mentality in me when it comes to strategies. As Curtis Cloke, a retirement income and financial planning expert, often puts it, “products and strategies are not good or bad, it is how it fits into a client’s plan that determines its effectiveness.”
One of those products and strategies that needs far more attention and coordination with financial advisors is home equity. Having taught, worked with, consulted and interacted with tens of thousands of advisors, home equity planning is essentially absent from most practices. This includes helping clients save for and purchase a home. While some advisors provide help here, many are absent from the decision making process and mortgage conclusion, which is often not pleasant for the client and most notably, represents the single largest financial decision a client will make.
When it comes to retirement planning, discussions about downsizing, refinancing, making renovations to the home to support aging and reverse mortgages are ignored in most financials plans. This void is shocking since home equity is typically the largest asset that most Americans have as they near and enter retirement.
This gap in planning is why a new development at the University of Illinois Champage-Urbana is so important. A group of researchers, thought leaders, planners and industry experts, formerly of the Funding Longevity Task Force, have just joined Dr. Craig Lemoine at the University of Illinois Financial Planning Program. In the past, the group consisted of independent researchers, including myself, which is important to note as I discuss the new organization. The team formerly tested retirement income strategies and the role of home equity in financial plans. While much of the group’s research then focused on reverse mortgages, the academy is committed to investigate a broader study of home equity and retirement security.
The research from members like Barry Sacks, Wade Pfau and Sandy Timmerman has reshaped best practices around retirement income planning and home equity. In fact, their work earlier helped change FINRA language on how reverse mortgages and home equities should be used in a retirement. The ongoing research impacted the decision of three large broker dealer compliance departments to remove their prohibitions against evaluating home equity in retirement plans.
While their work has been tremendously important, the Funding Longevity Task Force has always been more a sum of individual contributions to the research and planning literature, rather than being an organization that can drive change and research. That will change with the move to the University of Illinois, as it formalizes and codifies how home equity impacts retirement. The move to the academic environment represents the only U.S. academic initiative in a financial planning program that is focused on retirement income planning and home equity solutions.
Going forward, the academy will deliver webinars, research, videos, articles and other resources in its new incarnation. As Dr. Craig Lemoine, Director, states “ Without study, how do you know what the impact of home equity in retirement really is?”
Dr. Lemoine also explained further what he expects from the new initiative. “The Academy of Home Equity in Financial Planning is dedicated to studying aging in place, retirement sustainability and home equity. These elements are core to retirement conversations between financial planning professionals and their clients. So often financial services professionals are not trained or allowed to have dicussions about home equity or aging. The academy hopes to investigate, develop content and lead conversations about these topics across our profession.”
“The transition to an Academy of Home Equity residing within a major financial planning program is a major step for the American retiree to enjoy advice that includes their most valuable asset,” states Shelley Giordano, Founder. “The inclusion of home equity in comprehensive planning demonstrates that financial planning complexity is here to stay. Planners are encouraged to take note that the home asset can no longer be invisible in true financial planning.”
Jamie Hopkins, Esq., LLM, MBA, CFP®, RICP®, is the Director of Retirement Research at Carson Wealth and a former professor of Taxation at The American College, where he helped co-create the Retirement Income Certified Professional® (RICP®) education program. Jamie strives to increase the retirement income security of Americans by delivering practical and trusted retirement research and education. His most recent book, “Rewirement: Rewiring The Way You Think About Retirement,” details the behavioral finance issues that hold people back from a more financially secure retirement. He has been selected by InvestmentNews as one of the top 40 financial service professionals under the age of 40 and was also selected by The American Bar Association as one of the top 40 Young Attorneys in the country. In 2017, Trusts & Estates Journal awarded Professor Hopkins the Distinguished Author Award for his article on the Department of Labor Fiduciary Rule. He holds his LLM in Taxation from Temple University School of Law and his J.D. from Villanova University School of Law.