Darren Amos, a financial adviser at Anstee & Co, has focussed on equity release for several years. For him, it is possibly the most rewarding area of finance advice to be involved in.
“It’s as much the response you get from clients when you actually help them out,” he notes. “The main issue I find is getting that message across in the first place.”
For Amos, one of the main differences between operating in the later life lending space and the mainstream mortgage market is consumer understanding.
“You almost have to re-educate clients that equity release is just another mortgage and that it has a place in their lives,” he says. “There’s a mental barrier that comes from the historic horror stories in our market from 15-20 years ago, perhaps when people lost their houses and the families didn’t know about it until after the event.
“Then you have to really be keen to bring in other family members, so they don’t later on think you’ve done something you shouldn’t have; they may also have their own biases and prejudices against the equity release. “You need to be prepared to just talk it through and understand that the process is slower. In many cases with a normal mortgage, I might have a one meeting with people and a few conversations on the telephone and the rest is all done without them being part of the process. With equity release, several meetings involve usually long discussions about the pros and cons of what you’re doing because, although there are ways out of it, we’re really all talking about something that should be thought of as a once in a lifetime decision.”
Chris Flowers, head of intermediary sales at equity release provider Pure Retirement, has spent a decade in the later life arena, with four of those spent advising. He echoes the point regarding education.
“You’d like to think that when most clients come to see you about a normal, residential mortgage they kind of understand how it works: you buy a house, you make a monthly payment. After the term, it’s all paid off. With equity release, you’ve got to factor in that a lot of the clients don’t really understand how it works. And when they do understand how it works, then they’ll make an informed decision. It’s also more emotive decision compared to a mortgage.
“There are other factors to consider, such as care funding. You wouldn’t really speak about it to a first-time buyer. With them, the conversation wouldn’t be nearly as in-depth as if you’re speaking to a client in their 50s or 60s.
“You also have to consider that their age does not mean that they are going to vulnerable, but does mean that you have to make sure that the right steps are taken. We have to make sure that they are of sound mind.”
“You probably need to be much more skilled in managing your clients’ expectations and balancing a whole series of different and potentially conflicting issues,” adds Jim Boyd, chief executive of the Equity Release Council.
“You need to balance short-term needs to each of the long term needs and recognising that needs of people change over the course of their retirement. Typically, an early retiree might be looking at capital to enhance their retirement or maybe even repay debt. Or they could even seek a lifetime improvement through travel, all sorts of aspirational needs.
“But of course that changes over the course of someone’s lifetime because either they die or are in ill health. And then, as Chris said, you have to actually look at completely different issues like care.”
Boyd argues that the equity release sector needs to evolve its digital capability and marketing: “We’ve seen a greater use of websites and social media during lockdown,” he says. “I think that’s the direction of travel that we ought to go down, given that people aged 55+ are now just so much more internet confident. As an industry there’s a challenge there to service that, through the needs of consumers, supporting the customer journey, and again, with education. And then obviously to support advisers more with the tools they need to better manage their business.
“How do you give advice and support over the wide number of different products? How does the industry work and what things do you need to take you from being qualified to actually being competent and confident? What we’re seeking to do is to introduce a mentoring system, enabling those people who don’t actually have that opportunity to mentor with experts who are heavily skilled practitioners in this space. It means that they can actually develop over time with that level of support, so that they can be competent and confident. And that’s something which we’re just testing in the market at the moment with the view to launching later this year, first with financial advisers and then for solicitors who are coming to this space as well.“
The equity release sector still comes up against those with long memories in financial services and so Boyd is acutely aware of the need to maintain very high standards in the sector:
“Reputation is a critical issue and, as we know, it takes years for reputations to be built and seconds for reputations to be lost,” he says. “This market, which is hugely professional, has certainly gone through significant change over the last few years.
“This is an extraordinarily innovative market with the creation of marvellous products, with significant players engaging with it, but it is still hampered by this overhang from products sold before the Equity Release Council and its predecessor SHIP were founded, when we saw behaviours which were completely inappropriate and certainly wouldn’t be tolerated or accepted nowadays. And that’s a continuous process of engagement. But it’s a real thing and it’s significant; we can’t overlook it.
“Certainly from the Council’s perspective, the standards and the safeguards we insist upon are actually core to ensuring that customers trust equity release as reliable and safe. This something which we can only do with our members and these incredibly skilled professionals, who I know add so much to their customers’ lives.”
Tandi Fellows, a mortgage & protection adviser at Probity Mortgage Services, has started providing later life advice over the past year. She admits there has been a significant learning curve.
“I did the course through the London Institute of Banking and Finance. You get the qualification and the certificate, but it doesn’t give you half of what you need to be able to embark on the process.
“There are so many products out there. And how are you able to advise the clients on what’s best for them, if you yourself don’t understand the products that you are advising on, let alone how to source, let alone all the filters that are available?”
“I absolutely love the whole process of advising clients – it is a totally different advice process to with standard mortgages, where I usually have a two-appointment process. But with my later life lending clients, I say to them: “the process takes as long as it takes.”
For Fellows, the largest single fear clients have had was that they will lose their home.
“So I love going through the Equity Release Council brochure with them. I send it to them before I even start the process and really go through all of those guarantees: the no negative equity promise, the fact that they will stay in their home. I’ll go through every single paragraph of the KFI. I think it is so critical.”
David Phillips, principal at David Phillips Financial Planning, is new to the sector, having just completing the licences.
“We get lots of client requests to do this type of work,” he notes, “so we thought it would it be best to get ourselves ready and fit for purpose. We possibly should have done this quite a while ago because the requirement is becoming more and more relevant to the sort of advice.
“We have a total of around 350 active clients of which 60% of those are over the age of 60 – our oldest client is 103 years of age!
“Rather than referring them, we found clients like to have a one-stop shop, but also for the client to feel that you’ve got your arms around them and you’re able to provide advice along with the other things you’ve done in the past. I think it’s essential.”
Phillips sees the issue of vulnerability as vitally important and with that comes a much higher degree of appreciation of where the client is in life.
“One of the things which I haven’t got my head around yet is how when you actually start to involve the wider family and you have the client who wants to make this decision, you possibly have three children, two are supportive and one is not; how you actually bridge that gap?
“You’re not just actually having to educate the person who wants to [follow the advice], whether it’s equity release, or not, but you have to educate the other people in the audience. It’s quite a difficult conversation. You are trying to do with all these different perceptions of what it is you’re trying to do.
“Vulnerability means its very important way that we give the right advice. From the compliance point of view, things change over time so we have to ensure that the advice we have given is robust, not just now, but also in the future as well.”