My, My. I guess I stirred things up a bit. I made a comment in my Blog Post Breaking News! One National HECM (Reverse Mortgage) Lending Limit passed by the Senate! about the cross selling of financial products to seniors.
Here is what I said in regards to a provision in the legislation HR3221: "It is about time that someone restricted the cross selling of financial products and annuities to seniors. These are for the most part inappropriate products and have given reverse mortgages a bad name. It was not so much the reverse mortgage itself, but the inappropriate use of the proceeds that created the bad press."
Here is an email I got:
Dear Dr.: I am curious why you feel that cross selling is incorrect? If you had an eighty year old Aunt Alice living in a $100,000 home and no real savings and barely making it, why would you not want her to get a RM with the housefixed up, purchase a $10,000 Medicaid Approved Pre-Need Funeral Plan for her and Uncle Henry who has early stages of a serious illness with no more than five years to live? Let's together respectfully analyze this situation and see what are the best options for them.
Here is how I responded:
Dear___,
Are you a reverse mortgage consultant? I sure don't have any issues with the Aunt Alice in your scenario getting a reverse mortgage to fix up her home and perhaps have some extra to live on. And, if the $10,000 Pre-Need plan makes sense, I don't have a problem with that, either.
However, I do have a problem with selling seniors unneeded financial products just to make an extra commission. I find that annuities - in most cases - are not appropriate in that they tie up the senior's money, create taxable income, and sometimes provide less income than the tenure option. But it sure does create a nice commission for the insurance agent! (And by the way, I am a CA licensed life agent).
However, I might have been hasty in my blanket statement and should have taken more time to explain what I meant. My real point was that selling annuities to seniors has created some major bad press over the years and that it was not the reverse mortgage per se that was the culprit, but the inappropriate use of the proceeds. I do recognize that not all investments are bad. But I do believe the senior should get unbiased financial advice. Thanks for writing to me!
Sylvia
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