Acceptance can come in many different shapes and forms, particularly when it comes to the financial services market. There have been numerous examples throughout history when certain markets or product areas blossomed because of a variety of factors, namely timing, underlying demand, demographic changes, or just simply the introduction of technology.
Working in the equity release market, as I have done for the last 14 years, we have often talked about the sector in terms of its potential but have often tempered any thoughts of it moving into the mainstream because of certain factors. One of the key criticisms of the equity release market, specifically in recent years, was the accusation that a lack of active ‘big brands’ left many customers nervous about the products themselves. Could they be sure about the market when they had never heard of the providers in it?
Now, some within the equity release market might suggest this isn’t a barrier at all, however I’ve always thought that we would certainly benefit from having providers who were recognisable ‘names’ to customers. It’s not even a case that the client would have to take up a product from one of those ‘names’, just having them active would be enough to add another layer of confidence to those who may not know a great deal about the market.
I wrote about this very subject last year when it appeared that Santander were actively considering a lifetime mortgage proposition. I’m not aware of any further movement with regard to this however just recently we did get that big brand entry with the acquisition of New Life by Legal & General. Given the fact this is pretty much ‘hot off the press’, detail about what the future might hold is sketchy and it will be interesting to see whether L&G keep the New Life brand going or if it will put a specific L&G spin on it in order to bolster brand recognition and confidence.
However, what this clearly gives the entire equity release sector is a vote of confidence in its existence and the potential demand and growth it can offer major financial providers over the years ahead. L&G have become the only funder of New Life’s lifetime mortgage lending and I suspect, while it may well have been considering launching its own proposition, it has decided to instead acquire an already established business with its existing level of experience. Let’s also not forget that it’s gaining access to further intermediary distribution as well and, again this will be a shot in the arm to equity release advisers going forward.
While the market isn’t really getting a new provider, it is gaining access to L&G’s funding and this should impact positively in terms of product competition and potentially open up further product areas in the future. All in all, and despite Bridgewater also being a provider in this sector, this is a move which should be warmly welcomed by all stakeholders because it is a positive tick in the box when it comes to equity release’s attractiveness and sustainability going forward.
I’m sure, like many of you, active in the sector you have heard of other larger financial institutions circling the sector and therefore I suspect there will be a number of further announcements of new funding/new providers in the near future. This will also impact on us existing providers who will need to ensure our propositions remain attractive and should mean upping the game in terms of product choice and quality.
At the start of the year I felt that 2014 had been something of a watershed year for equity release and, just a month and half into 2015, that feeling has grown. The development of the market continues apace and, with the forthcoming pension freedoms and the changing nature of retirement living in the UK, I can only see increased demand for equity release and equity release/later life advisers. As an adviser in this market, now is certainly a good time to establish yourself as far up the pecking order as possible and to ensure customers and introducers know exactly where to come to access the highest quality advice.
Chris Prior is manager, sales and distribution at Bridgewater Equity Release