'Nobody Was Doing It': Home Lender Offers Financial Planning

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A mortgage firm that brings financial planning into the client's home buying decision-making process has built itself into a $3-billion-a-year loan originator with $2 billion in servicing.

Using proprietary software, Opes Advisors of Cupertino, Calif., shows would-be borrowers how purchasing a house fits into their total financial picture, currently and years into the future.

Many of the firm's 169 loan officers are Series 65 investment advisors, so they are able to operate the firm's software and are licensed to offer financial advice. (A Series 65 license allows individuals to act as investment advisors in most states.) Opes also employs four full-time financial planners, said CEO Susan McHan.

There is never any attempt to sell any financial service other than a mortgage, McHan stressed. But for clients who wish to go further, Opes has a wealth management division run by McHan's co-founder, Jonathan Lee, who also serves as chief technology officer. A third principal, Chief Financial Officer Mark Duvall, joined the company shortly after it was started in 2004.

The two co-founders, who met at a local business group meeting, came together from different walks of life. McHan's 28 years in mortgage banking included co-founding Elliot Ames, a high-end lender in the San Francisco Bay Area that was sold to First Horizon in 1999. Lee was a pioneer in cloud-based computing and the founding CEO of Corio, which was acquired by IBM.

As they talked, they realized they shared a common belief that there was a fundamental hole in the loan origination process — while a mortgage is supposed to be a part of someone's entire financial picture, no lender was able to show how buying a house and financing it fits into the whole. Nor were financial services firms equipped to analyze the future impact of their clients' real estate decisions.

"It's not really a groundbreaking notion, but you need to consider your total financial picture whenever you make a major financial decision, especially one like your home mortgage," said McHan. "It's just that nobody was doing it."

Opes is not only a full-service mortgage bank offering a complete range of competitively priced loan products, it also is a financial advisory firm offering financial planning and investment management with some $300 million in assets under its direction. Its 463 employees work in 39 locations in seven states in the Pacific Northwest — California, Colorado, Idaho, Montana, Oregon, Washington and Wyoming.

The premise behind Opes Advisors is simple: Doctors gather all the information they can to help in their diagnosis. And Opes loan officers do the same.

"We gather all the pertinent information that makes up a client's financial life, something the other mortgage companies don't do," McHan said. "And that's essential to a client's financial health."

At Opes, loan officers, also known as "mortgage advisors," work in tandem with SEC-registered wealth advisors to analyze a client's real estate decision and offer qualified financial advice.

Sometimes, a client sits down with the loan officer alone, other times with both professionals, to gather the necessary information to not only obtain a mortgage but also put together a complete financial profile, from their other investments to their daily expenses.

For competitive reasons, McHan won't reveal how many of its loan officers have a Series 65 license. (Administered by Finra, the Series 65 exam, called the Uniform Investment Adviser Law Examination, covers laws, regulations, ethics and topics such as retirement planning, portfolio management strategies and fiduciary responsibilities.)

The educational process to obtain an investment advisor license is offered to loan officers as a benefit to improve their skills and take their careers to the next level. If the loan officer does not yet have a Series 65 license, or doesn't want one, the client can ask for the services of a wealth advisor to provide additional guidance.

Once all the necessary data is plugged into the Opes Advantage software, which the company built on its own, a buyer can see how buying — or selling — would affect his or her financial future.

Take, for example, a hypothetical young couple considering buying their first house in the San Francisco Bay Area. Brad, 33, and Amanda, 32, are currently renting a place for $5,000 a month. (Remember, this is Northern California.)

Brad earns $215,000 a year; Amanda pulls down $110,000. Together, they have saved $300,000 in cash, plus they have put away $215,000 for retirement. And their nonhousing lifestyle expenses run about $90,000 annually.

Given that information and a few other things, the Opes program shows that if they decide not to buy, their holdings that can be converted to cash quickly will not last past age 84. It also finds that they likely will outlive their liquid assets and, with no home equity to rely on, they will probably need other sources of income in retirement.

But what if they decide to buy a $1.1 million condo? (Again, this in one of the costliest housing markets in the country.)

Under this scenario, the program predicts their liquid investments will last until Brad and Amanda reach 100 and they will have accrued $9.1 million in liquid assets when they reach retirement age versus $8 million if they continue renting. Furthermore, they will have built $8.7 million in equity.

Better yet, perhaps, a mobile version of the software allows clients to view the results of the application/planning session whenever they are looking at homes. So, if our fictitious couple should decide on a higher priced house instead of a condo, for example, they can make the necessary changes in key data and see how their financial future might change.

"They can model different what-if scenarios by changing a few basic assumptions and see the results immediately," McHan said.

What if a couple who is considering buying a house plans to have kids sometime down the road? The Opes software includes an index of average expenses associated with children, including the cost of private schools and college.

The index is one of several life expenses accounted for in the Opes Advantage program so clients can see how buying a house fits into their life goals. The software can be adjusted for current market conditions, inflation, deflation, taxes and other factors.

"Our brains are pretty adept at approximating a single variable's future consequences. But we find it difficult to predict the outcome of numerous variables. It becomes too elaborate a calculation," McHan said. Her firm's software "shows the relationship between the variables and lets you see your life in all its complexity across a multitude of different situations."

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