The Department of Labor recently issued a set of guidelines commonly known as the Fiduciary Rule.  Here are two examples of how the broad nature of the new rule makes it more important than ever for financial advisors to include a discussion of real estate and home equity options during the financial planning process:


    “Sequencing of Distributions” looks at the order in which retirees take distributions from their retirement accounts.  Funds from a mortgage or line of credit can be used to supplement clients’ income in the years where they take a reduced distribution from their retirement account.  This could preserve their assets for a longer period of time, and give them more flexibility as the market fluctuates.  Under the Fiduciary Rule, it seems possible that advisors could be held liable for failing to at least look at or consider this strategy.


    Approximately one in every five home buyers pays cash when buying a house.  Consider what might happen if a client pays cash for a $500,000 home.

    • Lack of diversification: the client is tying up a significant amount of money in one asset.
    • Lack of liquidity: if the client needs access to their $500,000, they’d have to sell the house (at a potential loss), or apply for a mortgage (with no guarantee of approval).
    • Opportunity cost: if the client were to use a mortgage and invest the difference in bonds or in their retirement account, what would be the impact on their net worth over 5, 10, or 20 years?

    In either of these examples, mortgage planning could become a crucial part of the client’s financial strategy. It would be a disservice to the client to ignore the issue or not present them with alternative options. By introducing real estate and mortgage planning into the financial planning discussion you will be able to truly engage in “comprehensive” and “holistic” financial planning while reducing your risk of violating the Fiduciary Rule.  Contact me for more details or to schedule a conversation.

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