Given the type of borrowers equity release advisers deal with – namely older individuals – customer vulnerability and how to recognise it, has tended to figure much more highly on our radars than it has perhaps done in other sectors of the market.
Indeed, with the regulator also defining equity release as ‘high risk’ and with a number of added protections in place for our sector, there has tended to be a much more forensic approach taken when it comes to potentially vulnerable customers and how equity release advisers ensure they do not progress cases where the client is in any way vulnerable.
In a sense, we are now seeing that approach broadened out to more financial services areas and the recent FCA best practice guidance on how firms can identify, and do more to protect vulnerable customers, should be a must-read for all.
As a business active in this space, we continue to help our member firms here – one of our Academy Ambassadors is TSF – a provider of mental capacity and financial vulnerability assessments – and we want to ensure advisers are following the right course of action when it comes to vulnerability.
That is a positive step forward, but at the same time, I wonder if advisers themselves – regardless of the sectors they are active in – aren’t also feeling somewhat vulnerable, particularly right now.
I appreciate that it may sound somewhat crass to suggest that adviser vulnerability should be thought about at the same time as customer vulnerability; like those within our profession who when confronted with ‘Treating Customers Fairly’, pipe up with, ‘What about treating advisers fairly?’ as if the former isn’t worthy without the latter.
However, when we are discussing the importance of advice, the provision of advice, the sign-posting of advice, and the benefits for consumers, this is predicated on there being enough advisers in order to service the demand.
And, it’s likely that post-pandemic/lockdown, the advisory profession and firms in general will be feeling wary about their own futures and whether, in this new environment, where clients’ financial situation could be vulnerable, they have a future worth pushing for.
Now, the obvious answer would be to say, ‘Yes you do’, however a recent survey – admittedly of IFAs – perhaps pinpoints the level of anxiety amongst advisers which could probably be translated into views right across the board.
The consultancy, AKG, polled over 100 advisers with a majority – 53% – saying they may have to close because of the COVID-19 pandemic, with 34% expecting more firms to sell up, and 45% anticipating more will retire. Of those polled, over three quarters – 76% – said COVID-19 was the ‘greatest external pressure on their firm’, an opinion I suspect many advisers within the mortgage/equity release sphere would concur with.
Now, I’m acutely aware that IFAs tend to specialise in different parts of the market – namely pensions and investments – and thus their view on their own futures may be somewhat different from those who specialist in mortgages/protection/GI/equity release, etc.
However, those types of worries tend to be universal, and while we might currently be seeing growing demand and therefore growing activity in our mortgage/equity release space, there may also be concerns about what happens should a ‘second wave’ hit, what happens if local lockdowns become more prevalent, what happens if the housing market is forced to close again, etc.
Advisory practices are, of course, not immune from this, and while we have not been as hard hit as some sectors of the economy, the impact could be just as severe if we are forced back into a March to May 2020 situation again. That’s why Air Group has focused on a message of ‘cashflow counts’ for our advisory members – ensuring that we do all we can to ensure cases are processed quickly and commissions are paid swiftly.
Again, it’s somewhat ironic, that at a time when consumers perhaps need advice on their financial situation more than ever, that we could be entering a phase where the supply of that advice is undermined. At present, mortgage/equity release business activity appears to be growing, but it’s also important that advisers prepare for a longer-term future when the level of business might fluctuate for reasons beyond their control.
In that sense, the message has to be around adviser diversification – getting involved in sectors which you may not have before – but it is also about pushing the advice message as far and as wide as possible. Particularly in the older customer space where they may be completely unaware of their options, especially for those who own homes and think they can’t access the finances they need.
There is plenty to be positive about, and plenty to keep advisory firms in work for a very long time, but we need to ensure that consumers are fully aware of what you can provide, and the benefits of being provided with it. No one wants to see the numbers of advisers fall but it will do if we, as a profession, do not continue to get on the front foot.
Stuart Wilson is CEO at Air Group