BestAdvice’s later life lending survey provides some fascinating insights into the later life lending market. I was particularly struck by advisers who said they find dispensing later life advice satisfying and how they welcome the fact they can find solutions for consumers. However, they also recognise it is a complex space. There are many reasons why people need additional funds over longer lives in retirement and therefore many considerations for advisers to balance, including an ever-expanding range of products designed to meet retirees’ needs.
The survey seeks to understand how respondents anticipate the equity release and RIO sides of their business might grow. The question itself reminds us that we are often too focused on products. We are all familiar with the impact of regulatory silos, creating barriers to consumer choice and ultimately growth.
This is one of the major areas of complexity for the later life lending market. As different options for later life lending grow, basic qualifications and understanding for advisers must grow too – to enable advisers to know when to signpost clients to the right advice they need, whether that’s from an equity release adviser or another specialist.
The Equity Release Council has been working with other trade associations and awarding bodies, in the later life space, to understand how advisers can stay up-to-date in a rapidly growing sector. We want to know what standards and key qualification units are required as well as the differences in regulatory permissions and oversight.
It is important the industry supports consumers to take a joined-up approach to later life financial planning. One that takes a holistic view about consumer choices, needs and outcomes that considers all wealth and assets. We must work with regulators and government to support access to better information, guidance and advice.
At the Equity Release Council we have been working with members to evolve our Standards. We have shifted the focus towards consumer outcomes, including how products, services and interactions with consumers can more effectively meet the needs of consumers in vulnerable circumstances. The Standards recognise that customer needs differ and that the best outcome can often be achieved in different ways.
In this context, I was particularly interested in the responses from advisers who appear to be relatively evenly balanced on whether the rules around RIO mortgages should be reformed (with 44% for and 56% against). I believe the second life in a RIO could benefit from the security of tenure standards that equity release customers benefit from. It would remove the risk of repossession if the first person dies or goes into long term care which must be a major concern to a vulnerable elderly consumer. This additional protection could drive growth but whether such products would be considered RIOs or perhaps hybrid later life lending products remains to be seen. In addition, how would it be best advised with the appropriate qualifications and safeguards for the consumer?
I would only be satisfied if such a product was sold alongside independent legal advice, as required by the Council for equity release products. This would ensure the elderly consumer understands the contract they were entering into and had capacity to do so. I would hope that the 82% of respondents in this survey, who thought the level of legal advice in later life lending was about right, would agree.
Provided qualifications were suitably evolved, legal safeguards were in place and product options, of the type I mention above, were developed, then a focus on the right consumer outcomes would surely develop the market. It would also provide more valuable solutions for consumers and could be extremely satisfying to advise upon.
Jim Boyd is chief executive officer of the Equity Release Council. This article was first published in the 72-page BestAdvice Later Life Lending Report. To download a free copy of the report, please click here.