It would appear that Chancellor George Osborne has spent the last couple of years looking to secure his legacy, certainly when it comes to the business of fundamentally shaking up the financial services market. This month’s Autumn Statement was perhaps not as ‘revolutionary’ as this year’s Budget but it still packed enough punch, particularly in the stamp duty changes, to be talked about for many years to come.
Adding these developments to the wholesale changes the pensions industry is about to go through, from April next year, and we are seeing a brand new environment in which the equity release sector will now have to exist. The pension changes in particular, with their increased flexibility for individuals, have been debated fulsomely especially in relation to how they might impact on the equity release market, and the truthful answer is that we cannot be certain about what the ultimate result will be.
Some think newly-retired individuals’ ability to access 25% of their pension pot tax-free, and the onset of what many are calling pension ‘current accounts’, will mean the demand for equity release falls back. I, on the other hand, see a future in which yes, individuals access their pension pots in the immediate period post-retirement, but further down the line look at their most major asset to keep the retirement fires burning so to speak.
Indeed, with a growing number of commitments for retired individuals to fund, there is no doubt in my mind that a person’s property will be increasingly used throughout retirement. As we move into this new market, it has become important for equity release advisers to look beyond their own shores. No adviser is an island and we have been preaching about the need for advisers to look at clients ‘in the round’ rather than simply focus on equity release.
This will become even more of a necessity from next April, and I have been encouraged by the number of advisers who recognise the need to improve their own knowledge of the pensions market or, at the very least, partner up with an appropriate expert. While the former option would be the most welcome route to follow, we have to expect that some equity release advisers will not want to train or gain qualifications in that area, however I suspect that clients will be much more inclined to secure the services of those who cover multiple product areas, rather than just one.
Surely this can be used as a point of differentiation? We already have far too few later life specialists covering all the bases and therefore any adviser and/or firm who is grasping the nettle and providing a far more holistic retirement advice service, is much more likely to prosper.
The other point to recognise is the role of the Government’s Guidance guarantee in all of this. While some bemoan the fact that there has been no ‘Advice guarantee’ to be offered by the advisory community and promoted by the Government, to my mind having gone through the Guidance, the need for further advice will be clear and obvious. In essence, Guidance takers are likely to need advice like never before and again, if you are a business which is covering all aspects of the retirement journey then I suspect you will be much more likely to be in demand than those simply willing to take clients on the equity release trip.
As per usual, in the financial services market we have been given something of a deadline to work to and, given that we are weeks away from the end of 2014, it is now something of a tight one. But, this should not put you off – decide on your course of action and begin your studies/training now, or look for those who can offer these services to your clients via an introduction. Next year will mark a sea change in our market and it is important that you sail through them successfully rather than be buffeted on the rocks.
Chris Prior is manager for sales and distribution at Bridgewater Equity Release