Ours is an industry where language matters. Where what we say to each other within our sector(s) can be perceived as a completely different language to those who do not work within it. Where consumers may well feel utterly baffled by the acronyms we employ, the regulatory and legalistic language enforced upon us, and the technicalities we can often become bogged down in.
The later life lending market is no different to others in that regard, however in a number of key areas we need to bite the bullet and bring about some much-needed clarity and simplification to our entire industry and, perhaps more importantly, consumers.
Now, of course, advisers will quite rightly say that it is their job to take the consumer through all of this confusing language, to make the complicated simple, and to provide them with the level of understanding they need in order to decide on the recommendations provided.
However, at the very outset we find a real problem, in terms of the proposition we offer to consumers, the products they will encounter, the differences between them, and indeed, more so than ever, the scope of those solutions available to them.
We, as an industry, have been talking a lot about what we are offering to consumers, and slowly but surely, I think we are all starting to understand equity release is not the only option in town, and if you are an adviser only offering these products, you still need to consider alternatives and refer to other firms if you can’t offer these alternatives yourself.
It’s why we have to talk about ‘later life lending’ rather than just equity release, and why I believe anyone simply specialising in equity release or not operating referral routes is, quite frankly, on borrowed time.
To that end, Air has been working on a number of initiatives in this space, and we have come up with ‘Comprehensive Conversations’ – a campaign designed to highlight a movement and a manifesto, focused on a ‘one market’ approach.
That is to secure a commitment from lenders, advisers, networks and clubs respectively to focus on all the options available to older borrowers and retirees; to stop ‘seeing’ mainstream and later life as two different markets, and focus on one which serves the borrowing needs of individuals as they move through life stages.
The best way we can do that is via a ‘comprehensive conversation’ focusing on their needs and taking into account all the product options available to them, not just a limited number.
The simple fact a client has options which do not begin and end with a lifetime mortgage now is, in my view, a nail in the coffin of that one silo approach. To begin with, we can segment the lifetime mortgage product options out – with payment term lifetime mortgages, optional payment lifetime mortgages, plus hybrid products offering a conversion into interest roll-up at an agreed period.
Add in other options such as traditional mortgages for the over-50s, or retirement interest-only (RIO) products, or products which have yet to be thought of or launched, and you can perhaps understand why I’m an advocate of ‘later life lending’ not just equity release.
However, the other point to make here, is what we ‘offer’ to consumers, what we call those options, and how we ensure it is as easy as possible for them to engage with our sector.
Again, to that end, we’ve created a ‘Later Life Lexicon’ document – a vocabulary guide for the entire later life lending sector which contains consistent wording on what later life is, what product types are available and how they differ, a brief history of later life lending and the current regulatory approach, plus details on ‘Comprehensive Conversations’.
There is also a focus on ‘Safer tracks’ and this is specifically for advisers to support them in terms of their Consumer Duty requirements, the wider array of products and solutions, and how they can combine the two in order to deliver positive consumer outcomes.
‘Safer tracks’ is essentially the processes advisers use, what they are doing to stay on them – the tools they use, the resources they opt for, the training they take, etc – and how they are keeping affordability, vulnerability, consumer understanding and the products available, at the heart of all customer discussions.
In my view, these are pieces of the puzzle for all later life lending stakeholders, and they come together in order to offer more options to customers, ensuring each product recommendation is the right one for each client based on their wants and needs, and not just on a limited approach and focus.
We appreciate this is going to potentially require some hard choices to be made by many in our industry, not least specialist advisers but also lenders and providers, and our trade bodies, for whom the ‘equity release’ badge is no longer sufficient enough to tell the whole story. Particularly in a Consumer Duty world.
However, ‘Comprehensive Conversations’, ‘Safer tracks’, the ‘Manifesto’ and ‘Lexicon’ are all designed to help the sector move along a path which is now a must for us.
This is big picture time – for a start, the later life lending sector is a far bigger sea to fish in than just equity release. We’re all acutely aware of that, and therefore the future of our sector is entwined in how we present a much wider offering to consumers.
Labels matter – and let’s hope in 2024 we can begin to badge ourselves appropriately and correctly for all those who might benefit from later life lending advice and the much broader array of products we can, and should be, offering them.
Stuart Wilson is chairman at Air Club