Specialist advisers are key to equity release’s growth, explains Peter Welch, head of sales and distribution at Bridgewater Equity Release
While the outlook for the wider mortgage market may be modest this year, the equity release market seems set fair. Intermediaries are positive about the prospects for the sector in the coming months, with adviser research Bridgewater conducted recently revealing that 77% of advisers expected equity release to flourish this year, 22% thought it would remain stable and just 1% envisaged a contraction. These figures make great reading for all of us operating within equity release, but this adviser optimism is tempered with a healthy dose of realism about the issues facing the sector.
More than three quarters of respondents admitted that equity release suffers from perception problems and is still viewed with suspicion by some and other obstacles cited by advisers included limited product choice as a result of insufficient funding, a lack of government support and fears that existing providers may withdraw from the sector. These are not new concerns and many of these worries have plagued the industry for years, but is enough being done to allay adviser – and ultimately consumer – fears?
Frustratingly, a large proportion of the concerns that older homeowners have about equity release simply aren’t true, but the messages of reassurance from providers and stakeholders simply aren’t getting through. The research uncovered that customers often fear they will be left owing more than they borrowed or that they will be ejected from their property before they wish to leave it, unaware that there are measures in place to prevent both of the above scenarios unfolding. While it is partly the responsibility of product providers to help address these concerns, advisers also have a duty to explain the whys and wherefores of equity release. One thing the research did indicate was the gulf in knowledge and experience between advisers who write a substantial amount of equity release business and those that only handle a handful of cases a year.
It is the specialist advisers that can help bridge the gap between where the equity release market currently is and where we would all like it to be. The credit crunch and subsequent economic fall-out has been an unsettling time for us all – particularly vulnerable customers who may not be armed with all the facts – but it has also been a prompt for people to take a closer look at their own finances. Advisers can harness this renewed diligence to suggest equity release as a viable solution to those concerned about pension provision, long-term care needs and the standard of their living into retirement. With an inordinate amount of stored-up wealth in thousands of properties across the country, it makes sense to utilise one’s biggest asset to help solve these issues rather than brushing it under the carpet.
Equity release can not only benefit those who take it out either. There have been a number of articles recently highlighting the ‘Bank of Grandma and Granddad’ phenomenon whereby grandparents are replacing parents as benefactors assisting their offspring with deposits and the like. Erosion of possible inheritance has often been cited by older homeowners as a reason for reticence when it comes to equity release, but it is becoming more common for such cash gifts to be made while they are alive. This can be a sensitive topic and it is the decision of older homeowners to make themselves rather than have the idea put to them, but the trend is another way equity release can be of use and may help explain adviser optimism for the sector.