In those pre-Covid-19 days – which seem a very long time ago – and specifically at the end of any given year, there is always plenty of talk about what might be the growing mortgage/lending sectors in the months and years ahead.
Few of the articles/conversations/debates on such a topic would have failed to mention the later life lending space, and even with 2020 being a very different year to how we would have envisaged it back then, there is plenty to suggest that demand in this area is unlikely to reduce and therefore the need for quality, professional advice will remain unchanged.
It will not need me to point out where the attractions of the sector lie, given the underlying demographics that are likely to fuel it. Pension provision, standards of living in retirement, a greater likelihood of debt in later life, funding of long-term care, a want to stay in the family home, a requirement or urge to help out family members – the list goes on in terms of potential reasons why individuals might increasingly want to access the equity in their homes in a safe fashion. Of course later life lending covers a range of options, products such as RIOs, mainstream mortgages with a higher maximum age, or indeed equity release.
Interestingly, there has been a renewed focus and reliance on the Bank of Mum and Dad (BOMAD) recently, most likely as a result of the reduction in high LTV mortgage products, and there is clearly a potential opportunity here for advisers to deliver multi-generational advice for those older borrowers who might be willing to use their property in order to help their children or grandchildren get onto the housing ladder.
Legal & General issued some statistics recently which suggested nearly one in four housing transactions would be supported in some way by BOMAD, and that a quarter were also reliant on financial support from their family and friends. Financial family ties are more prevalent than ever.
In that sense, we could potentially see the opportunity for advisers to combine these opportunities – covering both the requirements of parents and grandparents, while also securing the necessary mortgage for children.
There are undoubtedly a number of potential complexities to deal with, particularly around equity release, and also where a mainstream later life mortgage is being recommended, given that the firm is required to (at the least) cover off all potential options, even where it is not authorised to deliver advice in a sector, such as (potentially) equity release.
That is a clearly defined risk for many advisory firms who are very aware of the advice demand, but do not wish to fall foul of the regulations. The separation of equity release and mortgages for those in later life looks unlikely to change anytime soon – even if there are calls to move them closer together under ‘retirement finance’ – and, certainly from a Stonebridge network compliance perspective, we urge firms to be cautious here.
The point is this is not a market for every single advisory firm. I say this, not in terms of intellectual capability or indeed in terms of the ability to understand client needs and product availability or the potential for new business, but mostly because of its specialist nature. There are different regulations to follow, additional authorisations needed, and the fact, for example, that older clients may need a different style of advice, specifically when it comes to the ‘soft skills’ required.
Take the greater likelihood of dealing with vulnerable clients in this space, the advice touchstones that are necessary in order to be completely comfortable with the advice provided, and the understanding of that advice by the individual concerned, and it’s clear why large brokers and networks typically have a referral mechanism for their mainstream advisers to use. In our network this is a multi-award winning firm, Viva Retirement Solutions, who are a class act and a leader in their field.
Given such specialist firms are absolutely focused on this segment of the market, our ARs know the clients they refer will be in safe hands and thoroughly looked after, the advice will be of the highest quality, and they will receive referral income for very little work.
It is of course one thing to recognise the opportunity and to want to support older clients who potentially have such financial requirements, but another to be the adviser delivering it. Far better – and this is a point for all advisory firms to consider – to refer to a specialist like Viva and ensure the advice is spot on and all other requirements are looked after by a firm who simply do nothing else from morning until night.
Rob Clifford is chief executive of Stonebridge