Retirement Interest-Only (RIO) products have been described as a ‘real opportunity’ for advisers seeking to carry out more work in the later life lending space, but they have been warned not to ‘hang themselves with the rope’ they’ve been given.
Speaking at a debate on ‘Tackling Care & Capacity with Housing Wealth’ at yesterday’s FSE Midlands event, Stuart Wilson of the Later Life Academy (LLA) warned advisers who were looking to provide more advice to later life clients to ensure they were up to speed with all product options, not just the specific silo they were authorised to write business in.
RIO products are currently in the mainstream mortgage ‘regulatory silo’ and advisers who do not have an equity release qualification or authorisation are technically allowed to advise on them. A number of mortgage lenders who offer RIOs do not however allow advisers without equity release qualifications/authorisations to advise on them.
“I think it’s fair to say that I was affronted by the initial RIO proposals,” said Wilson. “But there is an opportunity here if advisers look at the clients and their needs in the round, after all the demographic for RIOs is exactly the same as for equity release. In that sense, why shouldn’t we be looking at a more robust legal and benefits process for potential RIO customers? And that goes both ways – it’s as true for mortgage advisers and equity release as it is for equity release advisers reviewing RIO/mainstream mortgage options.”
Wilson said he was loathe to suggest this was a problem that could be solved by advisers needing to secure more qualifications as “competency was far deeper than just exams and having certificates on walls” however added that “if the adviser is going to stand up to potential scrutiny in the future about the recommendations they have made, then they have to ensure they’ve been looking at the right customer outcomes”.
He added: “RIOs are an opportunity but we have to make sure we don’t take the rope we’ve been given and hang ourselves with it.”
Gary Webster of Equity Release Supermarket agreed that advisers needed to be careful they were taking all product options into account when dealing with a later life client but did stress the growth in the number of RIO products was also likely to grow the equity release market.
“The problem we have at the moment is that it’s difficult to say where RIOs fit,” he said. “The carnival has yet to start and there are lots of opportunities for more building societies and larger lenders to enter the sector. We do see the opportunity for advisers as a cascade; so a borrower coming off an interest-only mortgage could be put into a RIO this time because, for example, a lifetime mortgage can be quite restrictive in terms of ERCs, but afterwards the adviser can review and look at the equity release opportunities for the client.
“The good thing is that RIOs have created competition and that’s good for consumers. RIOs will grow the equity release market because it will bring more people into the market.”
Jim Boyd, chief executive of the Equity Release Council, agreed that “advice is everything” and that advisers should “be aware that certain RIO products are execution-only, and equity release products should be right at the heart of the solution as well.”