Moving swiftly past the half-way point of the year, provides us with six months of data, management/financial information, advice/recommendations, etc, which will tell us much about the year we are all having, and will perhaps give us food for thought for what the rest of 2023 will bring.
Certainly, when you review the later life lending market, demand, product availability, pricing, activity, and the rest, you may well be looking at a different data set in 2023 than over the past few years. Every year is of course unique but some are ‘more unique’ than others – I think when we look back at 2023, we’ll be able to see that quite clearly.
Without being overly dramatic, acceptance of the current market situation is absolutely vital for specialist later life advisers because, after all, you can only advise on the market as it stands now.
And, while of course, we would all like to see later life lending business continue to increase month after month, quarter after quarter, anyone who has been working in this sector for any length of time, will know that ongoing/never-ending growth is simply not possible, perhaps not even desirable.
The other point to make here – and this was a view widely held by participants in our lender/provider panel session at the recent Air National Later Life Lending Adviser Conference – was the sense of perspective we all need to have around market activity now and what it signifies.
Of course, specifically when it comes to equity release activity, we have all benefited from an increase in demand for these products and the corresponding growth in advice over the past few years in particular.
Figures from the Equity Release Council over those years have tended to reveal strong new customer numbers/total lending/loan sizes, etc, and certainly when it comes to overall lending we have seen a significant growth over the period.
The most recent figures from the Council – for the first quarter of 2023 – however told a somewhat different story with new/returning equity release customers down 19% from Q4 last year, total lending at £699 million – the lowest since Q2 2020 – with new customers reducing their loan sizes with the average first release from a drawdown lifetime mortgage at £61,785, down 34% year-on year. Early indicators suggest the figures in Q2 2023 are unlikely to be more positive.
But, as advisers will know, this is the logical output of an economy which has seen higher interest rates, a move to a new environment in that sense, and as we have all noted, a move in demand from wants to needs.
And yet, when it comes to the equity release sector, we can genuinely say that this current market is incredibly similar to the one we were in a few years ago. And, as was pointed out, few would have thought that a ‘depressed’ market or one in which firms might be ‘struggling’.
Now, of course, this is all relative. When you see business improving month-on-month, you have a changed perspective, you get used to the extra income, your firm moves into a different echelon, you might invest more in tech/resource/lead generation, etc, and when the market shifts slightly you have to reassess how you continue in this new situation.
But, few of the advisers/owners/firms we speak to, would ever think this was a terminal situation in terms of business levels. Instead, what I believe many will now be doing is looking to cut their cloth accordingly, but also ensure they make the most of the opportunities they do secure, and potentially what other product/service strings they can add to their bow.
Certainly, within Air we’ve seen firms embracing the resource and support we provide them with, particularly around Consumer Duty, for instance, and developing a more ‘holistic advice’ offering to their later life lending customers, because essentially that’s what the regulator is looking for. It wants firms to engage with customers, not just at the transaction point, but regularly after this, ensuring that if, or rather when, their circumstances change they can continue to deliver the positive outcomes the Duty demands.
So, in this market, thinking about the whole package of services and products firms are delivering to their customers is vital. As is making sure these are regularly communicated to existing clients therefore making them feel looked after, and comfortable they only need go to one place for their financial advice needs, rather than having to shop around. You will be their adviser, hopefully for life.
This market does feel different to recent years – there is no getting away from that – but it is not an alien one that we haven’t seen before. Far from it. Firms were successful and profitable and made the most of their opportunities the last time the market looked like this, and there’s nothing stopping them from doing the same again.
Stuart Wilson is chairman at Air Club