The Hidden Liability in Retirement Planning: What You Are Not Accounting For Could Hurt Your Clients…and You

For years, the financial advisory profession has worked hard to evolve from product-driven sales to holistic, fiduciary-based planning. Advisors today pride themselves on offering tax-aware strategies, risk-aligned portfolios, and comprehensive retirement roadmaps.

But despite that progress, one of the most valuable assets on a client’s balance sheet is often left entirely out of the plan: their home equity.

And that omission may not just be a missed opportunity; it could be a growing liability.

The Asset That's Too Large to Ignore

Even among higher-net-worth households, housing wealth often represents 15% to 30% of total net worth, yet it remains one of the least modeled and least discussed assets in most financial plans. For mass affluent clients, it may be their single largest asset.

Why?

Because housing wealth has historically been viewed as untouchable, a place to live, a source of legacy, or a potential asset to be dealt with “later.” But “later” has a way of arriving sooner than expected.

The Real Risk Isn’t Volatility - It’s Invisibility

Omitting a client’s home equity from planning isn’t the same as choosing not to use it. It’s worse. It assumes the asset doesn’t exist as a viable tool, even when clients are asset-rich, income-constrained, or vulnerable to healthcare shocks.

Advisors are trained to look for downside risk in markets, tax law, inflation, and longevity. But the bigger risk may come from what they didn’t plan for at all.

• What happens when a client liquidates a portfolio prematurely because they didn’t know their home equity could have filled the gap?
• What happens when a widow remains in a home she can’t afford, while drawing down her investments unsustainably?
• What happens when heirs question why a lifetime of equity sat idle while other financial assets were exhausted?

These aren’t theoretical questions. They’re real consequences that can erode trust, relationships, and even reputations.

Omission Carries Consequences

No advisor sets out to ignore a critical part of the client’s wealth picture. But if you never bring it up, you risk being seen not only as providing incomplete planning, but as negligent.

And as planning technology, consumer awareness, and competitor firms increasingly factor in housing wealth, the standard of care is shifting. At some point, not accounting for home equity in the plan will feel as neglectful as ignoring long-term care risk or failing to run tax projections.

This shift isn’t about selling products. It’s about protecting outcomes and fulfilling the duty to deliver complete advice by including everything in the analysis.

From Exposure to Empowerment

The good news is that this isn’t hard to fix.

Advisors don’t need to become mortgage experts. But they do need to be aware of the strategic uses of home equity, including downsizing, HELOCs, traditional cash-out options, HEAs, sale-leaseback options, and properly structured reverse mortgage solutions. Each option, modeled against a home paid off with no home equity solution, will produce a unique outcome.

When integrated correctly, these solutions can:

• Increase retirement income flexibility
• Reduce portfolio withdrawal pressure
• Provide tax-free cash flow during high-bracket years
• Offer a standby reserve for healthcare or longevity risk
• Support aging-in-place goals without destabilizing the rest of the plan

They can provide meaningful improvements in the plan, not hypothetical scenarios.

A Fiduciary Framework for the Future

As fiduciaries, you are not just managing investments; you are managing lives. And that requires work across the entire balance sheet, not just the parts that generate AUM.

Planning that includes housing wealth isn’t about selling a mortgage product. It’s about asking better questions, exploring advanced planning strategies, underused solutions, and helping clients make more informed, confident decisions.

It’s also about protecting your practice.

Because in an era where planning is being commoditized and AI is accelerating the modeling of previously ignored assets, clients will migrate to those who offer the most complete, thoughtful, and flexible advice.

Final Thought: It’s Time to Rethink What We Leave Out

Ultimately, the riskiest assumptions in planning are not the ones we debate. They are the ones we never talk about. And for millions of older Americans, housing wealth is one of them.

By acknowledging home equity as a real, alternative asset class and not just a sentimental one, we can give our clients better outcomes, our firms better retention, and the planning profession a stronger future.

Our team is uniquely positioned to help advisors. Check out one of our upcoming webinars or contact us directly to discuss further.