If you rewind back a few years to before the global financial crisis, financial advisers were happy to stick to product areas they knew well and volumes were sufficient that such concentration of efforts didn’t affect their bottom line. The more adventurous and ambitious intermediaries tried their hand at complementary product offerings, but mortgage brokers, for example, were inundated with enough borrower enquiries that it was understandable if they stuck to home loans. Then the credit crunch hit and all of a sudden diversification wasn’t simply the hallmark of those looking to extend their businesses, but a financial necessity as mortgage activity dried up overnight.
Running parallel to the shifting economic landscape were regulatory developments which didn’t necessarily dictate that advisers broaden their horizons, but subtly posed the question of whether brokers were doing their best by the client if they didn’t at least consider all the options available to them.
No one expects advisers to have a detailed knowledge of every possible product niche off by heart, but by at least establishing referral relationships or symbiotic partnerships with intermediaries outside their own sphere, then the client’s chances of getting the most suitable product increases. This is far more favourable to being turned away by the initial adviser or, worse still, being shoehorned into inappropriate solutions as it is all the broker can offer.
The final Mortgage Market Review rules published at the tail-end of last year further fine-tuned what is expected of advisers, with the statement that vulnerable customers must always be given advice acknowledging the importance of meeting older homeowners’ needs. Where brokers may have previously dismissed equity release as an area they didn’t wish to give advice on, it would now appear to pay to at least team up with a specialist adviser who does. Factor in an ageing population, an increasing number of older homeowners carrying debt into retirement, ongoing uncertainty around the financing of long-term care and it certainly makes sense for brokers to do their homework into how they can best cater for such clients.
With first-time buyer volume levels still far short of what they were before the global financial crisis – and unlikely to significantly recover until the Help to Buy scheme grinds into gear next year – brokers could do worse than shift their attentions to how they can be of assistance to their older clients.
In addition to the aforementioned financial pressures on older homeowners, there is the well-documented problem of borrowers trapped on interest-only mortgages with little hope of being able to remortgage onto a more suitable deal or even in fact having the means to repay the capital element without assistance. Equity release may not be the right answer in every circumstance, but with some older homeowners fast running out of options, it pays for them to be able to at least consider how a home reversion plan or lifetime mortgage may be able to help reduce the pressure.
It’s not just individuals in difficulty who may require the financial injection that equity release can afford them. With a growing number of older homeowners gifting deposits or lump sums to their grandchildren and children to help them get a foot on – or move up – the property ladder, intermediaries could potentially miss out on two lots of business of they are not adept at identifying how equity release could be of benefit in such a situation.
The long and short of it is that brokers are within their rights to continue to ignore equity release, but by doing so they may not only be missing out on business, but they might not be best serving their existing clients’ needs.
Chris Prior is manager, sales and distribution at Bridgewater Equity Release