BestAdvice (BA): What are biggest changes you have seen within the equity release market throughout your career?
Dave Harris (DH): I’ve watched the range of equity release products available broaden and develop hugely over the last few years and would without a doubt say this has been one of the biggest changes the market has experienced. In today’s retirement landscape there is no ‘one size fits all’ approach to lending, and it is great to see this reflected in today’s flexible and ‘modern’ product range. Modern lending is something that we as a company are committed to – it means ensuring that our product development reflects what is actually happening in the market rather than trying to be overly clever. This is essential as equity release can benefit more than just its primary customer. For example, increasing numbers of older homeowners are beginning to ‘gift’ their housing wealth to their younger relatives to help with property purchases.
BA: What can we expect to see from More 2 Life this year?
DH: We are continually reviewing our product panel to ensure we can cater to more and more borrowers looking to supplement their retirement income, so additions to our already diverse product range can certainly be expected. We are also placing a greater focus on technology within our services to help speed up the application process for advisers and customers alike. Traditionally, the equity release market has been dominated by paper-based processes, but with the arrival of new digital tools, we will be able to help more people along the equity release advice journey and drive further efficiency during the process.
BA: Vulnerable customers have been a big focus for the FCA in recent years. What does the later life market need to be doing to help identify and protect vulnerable customers?
DH: Research conducted by More 2 Life last year revealed that there is a clear demand for more education and resources to help advisers clearly identify and support vulnerable clients. More than 8 in 10 advisers surveyed said there was a need for this. As an industry, we must instil confidence in advisers to speak openly and honestly with their clients about any potential for vulnerability. Lenders must be at the forefront of this; they need to support advisers during the application process and answer any questions they may have. Additionally, resources such as webinars go a long way towards providing advisers with the information they need at the click of a button.
BA: How can equity release be better integrated into retirement planning, and what benefits would this bring?
DH: Independent financial advisers (IFAs) and wealth managers need to ensure that housing wealth is included as part of their conversations with clients when discussing their retirement planning. A recent report from the Equity Release Council – sponsored by Key – suggests that 40p in every pound of wealth that over-65s hold is tied up in property. Ensuring that that these assets are considered is vital as it could significantly improve a significant number of people’s standard of living in retirement.
Ideally, intermediaries should work to pass their CeMAP and then CeRER exams before looking to provide the advice themselves. That said, some might prefer to set up an agreement with a referral service to test the waters with their clients. Irrespective of which route they choose, we are keen that they do engage with the market.
Thinking about this more widely, we would also be keen to see the use of property wealth routinely mentioned as part of wider financial planning conversations. For example, a mid-life MOT has been suggested and this would be a perfect opportunity to ask people if and how they intend to use housing equity to fund their later life.
BA: How can there be more digital progression in the equity release market?
DH: It’s vital that advisers make use of the technological innovation coming through the market. There are a wide range of options available to help them with the advice process, including online application approvals, electronic tracking and SMS updates. With these sorts of tools, advisers can better manage client expectations, gain back precious time spent on administrative tasks, and help more customers who are coming to them in later life seeking financial advice. However, the value and importance of providing face to face advice will remain, particularly with older equity release customers. Achieving the right balance here will therefore be key.
BA: What advice do you have for mortgage brokers who are seeing more enquiries from clients in later life?
DH: Many advisers are still cautious about stepping into the equity release market but who better to help your valued clients than you or one of your colleagues? The UK’s later life population is expanding at a faster pace than ever before and it is crucial that enough advisers are on-hand to serve this growing pool of customers. Equity release should be seen as an extension of an adviser’s business, providing both advisers and their clients with more opportunities, and we hope to see more of them reaping the benefits of this in the near future.
“Lenders in this market such as More 2 Life have a whole host of webinars, marketing support and other useful tools to help advisers who want to enter the market or need support speaking to customers. We are really open to conversations and discussions.
To be one step ahead of the game, we also encourage advisers to begin speaking to clients in their 40s and 50s. This will help clients better prepare for retirement and gear them up to the solutions which will soon be available to them. By doing so, advisers can help more customers, particularly those who are concerned about their finances in the run-up to retirement, dissipate any fears they may have, and encourage them to start thinking tactically about their financial situation to better help them in the long-run.
BA: Do you expect take-up of RIO mortgages to increase significantly over the next 12 months?
DH: Last year saw the return of retirement interest-only mortgages (RIOs) to the mortgage market, so it’s likely that this year will see even more activity in this space. I expect to see more providers developing and launching these products as part of their proposition as well as other lenders considering how they can develop their existing products to compete with RIOs. From our perspective, RIOs are very much part of the later life lending life cycle. You may find someone taking out a RIO in early retirement – if they meet the affordability criteria – and then remortgaging to take out equity release. What the later life industry could be doing as a whole is bridging the gap between RIOs and equity release mortgages to help the growing pool of customers.