In 2012, when Alan was 60, a member of his family got themselves into serious financial difficulties. Alan decided he could avert a disaster by buying a second house for his relative and their family. He approached a mortgage adviser to understand his options, including equity release. Alan settled on a 10-year interest-only mortgage with a five-year rate guarantee.
Alan was in a relatively well-paid job and was confident that investments he held would grow sufficiently to enable him to pay off the mortgage. Alan is now 65 and the rate guarantee is expiring. The lender’s SVR is marginally lower than the guaranteed rate.
For Alan over the five years some things have gone to plan, others have not. The main change to his life has been that following a health scare two years ago he retired earlier than planned. On the other hand, his investments have outperformed and he can now repay his mortgage. Over the past five years Alan and his wife have received birthday and Christmas cards from his mortgage adviser. It would appear the adviser’s customer contact system is working well. Isn’t it?
Alan recently received two communications from his mortgage lender. The first to tell him that his rate guarantee was coming to an end and that he was moving to the SVR. The second reminded Alan how much was outstanding on his mortgage and also that his home was at risk if he did not have the means to repay the loan at the end of the mortgage.
Surprisingly, he did not receive any communication from the mortgage adviser especially as interest rates are generally much lower than they were in 2012. It is as if the mortgage adviser is waiting for Alan to contact them.
As there has been no contact, the adviser has no idea of Alan’s changed circumstances, his current position or future plans. In their ignorance, the mortgage adviser could actually be considering:
- The possibility of arranging a new ongoing mortgage for another 10 years at a rate lower than the existing lender’s SVR, with the possibility of another guarantee period offering some protection from increasing interest rates.
- If Alan’s health had affected his earning capacity and his investments underperformed, a review should take place, before the pressures of mortgage repayment come onto the horizon. Will this involve downsizing or equity release?
- Alan is now 65 and has reached State pension age. How are his circumstances changing? Has he planned his retirement? Has he an adviser? Can we introduce him to one that will that will help him with his retirement needs and find him the necessary solutions?
Alan is reasonably well off but because of his actions he could now have some difficulties in successfully transitioning from work into retirement. His retirement could last 20/30 years or more. In that period he may receive inheritances, he may divorce (in the US 25% of couples divorce after age 65), he or his wife, or both, could go into care. He owns two houses – are there inheritance tax and estate planning issues that need to be addressed? Have his retirement plans delivered? There are plenty of needs for financial advice now and in the future.
If the 2012 experience was such that the mortgage adviser had earned Alan’s trust, who would he be most open to talking about his finances now? Such conversations could lead to all sorts of financial advice opportunities. A recent International Longevity Report said those who use financial advisers end up 40% better off than those who do not. Directing him to advisers who are trusted to deliver a first-class service could make both Alan and the mortgage adviser better off.
Mortgage advisers are for many the first and sometimes the only engagement many have with financial advisers. By using their customer contact systems to ensure they remain the first point of call whenever their customer needs financial help they will be providing a service for their customers from which all parties should benefit.
This is what a good customer contact system should deliver for the adviser, not just birthday and Christmas cards.
Bob Champion is chairman of the Later Life Academy (LLA)