LIABILITY MANAGEMENT AS A PROFESSIONAL DISCIPLINE

Why the Vacuum Has Been Filled by Bad Ideas — and Why That Matters to Planners

Introduction: The Quiet Risk Advisors Are Already Seeing

Financial planners do not need to be convinced that the retail debt‑reduction industry contains bad actors.

Most already hold strong views about:

• Pay off your home in five years programs
• HELOC‑centric mortgage acceleration schemes
• High‑fee systems marketed as proprietary math

These programs are not fringe. They are increasingly visible in client conversations, often after damage has already been done.

The more important question for planners is not whether these programs are flawed. It is why they continue to gain traction, and what happens to clients when legitimate professionals do not engage the liability side of the balance sheet.

The Pattern: When Liability Strategy Is Ignored, Others Fill the Gap
Most planners focus, appropriately, on:

• Investment policy
• Tax efficiency
• Estate structure
• Long term planning

Mortgage strategy, debt sequencing, and liquidity trade offs are often treated as secondary, tactical, or outside scope.

This avoidance is understandable:

• Mortgage advice is difficult to monetize
• Compliance boundaries are unclear
• The topic has been polluted by questionable marketing

However, the absence of professional guidance has had an unintended consequence. A vacuum formed and it has been filled by simplistic, confidence driven debt narratives.

The Most Common Harmful Narrative: 'Pay Off Your Home in 5–7 Years'

The most prevalent version of this narrative includes the following claims:

• Accelerated payoff without extra money
• Interest “cancellation” through account structure
• HELOCs as safe, flexible liquidity
• Assertion that this approach is universally superior

These programs often succeed in one narrow sense: they cause households to send more money toward debt. But the framing is deeply problematic.

Where the Sleight of Hand Occurs

The central issue is not that debt goes away faster. It is how the outcome is explained.

Structure Is Credited for What Behavior Produces

In nearly all cases:

• Payoff acceleration is driven by cash‑flow intensity
• Not by interest mechanics or account choreography

Yet the structure (HELOCs, sweeps, velocity language) is presented as the engine.

This misattribution matters, because it justifies:

• High upfront fees
• Ongoing dependence on 'the system'
• Dismissal of simpler, safer alternatives

Liquidity Risk Is Minimized or Ignored

A particularly concerning feature of these programs is the treatment of liquidity.

Clients are frequently told that:

• Emergency savings are inefficient
• Idle cash should be eliminated
• HELOCs can serve as a substitute safety net

History contradicts this narrative. During periods of stress (most notably the 2008 Global Financial Crisis) HELOCs were:

• Frozen
• Reduced
• Cancelled entirely - often precisely when households needed liquidity most

I know this to be the case. It happened to my clients.

A strategy that improves a spreadsheet while increasing fragility is not conservative. It is path‑dependent risk masquerading as optimization.

Retirement Contributions as Collateral Damage

Another recurring pattern reported by clients and advisors alike is the suggestion that households:

• Reduce or suspend retirement contributions
• Deprioritize investing entirely
• Liquidate tax‑advantaged accounts

to “get out of debt faster.”

This is often accompanied by emotionally framed statements such as:

• “You’re too old for compounding to matter.”
• “Your only goal should be retiring without a mortgage payment.”

These arguments are rhetorically powerful, and financially incomplete.

They convert a trade‑off into a commandment, and they often undermine:

• Tax‑advantaged growth
• Long‑term portfolio discipline
• Retirement outcomes planners are hired to protect

From a planning perspective, this is not debt strategy, it is asset reallocation by coercion.

A Brief Note on Credit‑Destructive Debt Elimination

While this article focuses primarily on mortgage‑acceleration programs, planners are also familiar with a parallel industry:

• Debt settlement
• Credit repair through default
• Programs that intentionally damage credit as a means of leverage

Although these households may be less likely to engage a financial planner initially, the downstream effects are not isolated.

Clients who impair credit, liquidate assets, or abandon investing often re‑enter the planning conversation years later – with diminished optionality and lost compounding.

The common thread across both industries is the same: Outcomes are emphasized while second‑order consequences are obscured.

The Consequence for Planning Relationships

When clients engage these programs, planners often face:

• Derailed investment plans
• Liquidity shortfalls
• Tax inefficiencies
• Difficult conversations after the fact

The issue is not that planners failed. It is that a discipline gap exists.

Reclaiming Liability Management

Liability management, done well, is not:

• Debt elimination evangelism
• Interest‑rate arbitrage
• Acceleration at all costs

It is a risk‑management exercise.

At its core, it asks:

• How much leverage is appropriate?
• How much liquidity is enough?
• When does acceleration improve outcomes?
• When does it reduce resilience?

These are not fringe questions. They are planning questions.

Why the Home Sits at the Center

For many households, the primary residence represents:

• Their largest asset
• Their largest liability
• A significant source of optionality

Yet long‑term stewardship of this asset‑liability pair is rarely addressed systematically. This is not a criticism of planners. It is a structural reality.

The absence of coordinated guidance leaves homeowners vulnerable to narratives that frame the mortgage as a moral burden rather than a balance‑sheet component.

Proper liability management can, as a secondary benefit, help households understand when:

• Equity should be protected
• Leverage should be reduced
• Flexibility has higher value than certainty.

But this is an extension of the discipline, not its justification.

What Legitimate Liability Management Looks Like

A professionally sound approach:

• Distinguishes behavior from structure
• Treats liquidity as a first‑class asset
• Integrates retirement saving rather than suspending it reflexively
• Stress‑tests strategies against real‑world disruptions

It does not promise certainty. It provides guardrails.

Why This Matters Now

When planners do not engage liability strategy at all, clients will still make decisions, often guided by those willing to sound confident rather than careful.

The choice is not whether liability management will occur. It is who will frame it.

If left unaddressed, simplistic programs will continue to:

• Undermine planning outcomes
• Divert assets from disciplined strategies
• Erode the long‑term work advisors are trying to do

Conclusion: An Epiphany, Not an Accusation

Liability management belongs in holistic planning not because it is exciting, but because its absence has consequences. When done poorly, it destroys flexibility. When ignored, it invites others to define it badly.

When done well, it reinforces everything planners already value:

• Resilience
• Optionality
• Long‑term stewardship

The opportunity is not to compete with bad programs. It is to make them unnecessary.

Closing Thought

If professionals do not provide a disciplined framework for managing liabilities, clients will continue to encounter confident voices offering simple answers to complex trade‑offs. And confidence, when unearned, is rarely harmless.

Kent Kopen is a founding member of the National Institute of Financial Education. Since 2007, he has been educating and providing value around liability management and mortgage lending.