Education about home reversion plans is critical. Even in the advisory community. We find it imperative to help this educational process to support advisers and we find it most effective to get out ‘into the field’ so to speak. It’s still however a major concern that far too many ‘specialist’ equity release advisers do not have their permissions to advise on the product and there is still an overwhelming feeling amongst some that equity release equals lifetime mortgages.
That’s simply not the case, and even though the volume of reversion plans sold is perhaps not what it was a few years ago, the product should (at the very minimum) be understood and taken into account when advising clients. How can you pretend to give a full equity release advice service if you are not considering home reversions? To my mind, you cannot.
The work we have to do on educating the sector about reversions was brought home to me by a recent round table event we held. These provide an opportunity for advisers to discuss many of the issues in the equity release market and also allow them to quiz a number of experts on all manner of areas.
At the latest one, the discussion turned to reversion plans. A number of the adviser attendees had suggested early on that they wanted to learn more about the products and Bridgewater’s role in the sector particularly. Nothing wrong with that and of course we were happy to cover this area however part of me did bristle slightly when the following comment was made with regards to early repayment charges and home reversion plans. One adviser said: “The ERC on a home reversion plan is a lot less than a lifetime mortgage then.”
Given that the regulator expects advisers to at least be considering both lifetime mortgages and home reversions, I would also have expected everyone in that room to know the basics of how a reversion works and the rather important fact that there are no ERCs with reversions. This goes a long way to showing that given the pre-eminence of lifetime mortgages in the sector at the moment, some advisers could not just be short of knowledge about reversions but are completely ignoring them all together. This despite the fact that there are essentially only two equity release product choices to be made
At the moment, because reversion numbers are relatively low, this might appear not to be an issue in the sector. However, this can change particularly quickly and advisers with little or no knowledge of the products are going to be failing their clients if they are not actively considering reversions and blindly presuming that lifetime mortgages are always the right recommendation.
If an adviser does not know about the lack of ERC with a reversion plan, do they know what type of clients are best suited to a reversion? Are they taking into account longevity when assessing a client? If the client’s health history suggests they are going to live a long time in retirement are they actively considering the value that a reversion can offer? If the client actively wants to guarantee inheritance from the property do they know a reversion can provide total certainty in this area? These are certainly the types of questions an adviser needs to ask and the answers provided may well mean that a reversion is the most suitable option. However, if you don’t have the necessary reversion knowledge or the actual permission to advise how can you make the right recommendation?
This should be a real concern for advisers in this position because, not only, would it affect the advice the client is getting but it may also interest the regulator further down the line if the client feels the recommendation should have been much different. The number of products within the equity release market is not that vast so it should not take much on an adviser’s part to have knowledge about all parts of the sector, not just the predominant product type. We are here to help advisers gain the necessary knowledge about reversions and it should be the time to make sure all product bases are covered.
Chris Prior is manager, sales and distribution at Bridgewater Equity Release