Education key to reverse mortgages

Jo-Anne Bloch

The Financial Planning Association (FPA) has flagged its intention to next week release a guidance document for financial planners to assist them in dealing with reverse mortgage products.

The FPA’s chief executive, Jo-Anne Bloch, flagged release of the guidance documentation in the wake of the release of an Australian Securities and Investments Commission (ASIC) report on reverse mortgages that revealed many consumers simply don’t understand the products and how they work.

Bloch said that aside from issuing guidance on the reverse mortgage products, the FPA would also develop training for advising on the products.

“We endorse the need for financial advice because financial planners are able to assess the suitability of taking out a reverse mortgage, they will advise on the terms and conditions, and ensure a good, manageable fit based on their clients’ financial needs,” she said.

Bloch’s comments came as consumer group Choice called for far stronger national regulation in the industry, claiming existing laws did not adequately protect consumers from the dangers of reverse mortgages.

For its part, SEQUAL has called on ASIC to continue to work closely with the reverse mortgage industry to build financial literacy.

SEQUAL executive director Kieren Dell revealed that his organisation had commissioned research that supported the need for increased consumer education.

He said initial results show almost 80 per cent of retirees are aware of reverse mortgages, however, over 50 per cent still struggle when it comes to understanding the basics of how they work.

“It’s important to offer protection to seniors, but more important to invest in their long-term financial literacy. This task has largely been left to SEQUAL’s members and the brokers, financial planners, accountants and lawyers dealing with seniors,” Dell said.