Reverse Mortgages: Challenging the Trade-off between Financial and Real Assets
The aim of this paper is to question whether it still makes sense to feel attracted by the trade-off between financial and real assets, based upon the main features of reverse mortgages. Towards this ambitious goal, useful insights can be gained by exploring Italy’s recent legislation regarding these loans: on one hand, new opportunities to borrow have been made available, that are secured by home equity and that represent strategic options for financial management purposes, despite some criticism and limited adoption so far; on the other hand, homeowners are encouraged to reconsider their residential property as a way not only to satisfy their housing needs but also to achieve higher standards of living, especially after retirement. Within this framework, the trend towards increasing globalization has made traditional keys of classification obsolete; therefore, total wealth management should be focused on, rather than paying as much attention as in the past to portfolios consisting of securities alone. Conclusions sound like an invitation to devote unprecedented energies to financial counseling and education, in order to increase individual investors’ awareness and help them to make more informed decisions about their asset allocation, particularly in the later stages of their life cycle.
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Department of Industrial and Information Engineering, and of Economics, University of L’Aquila, Via Giuseppe Mezzanotte, 67100 L’Aquila, Italy.