We all admit there is a clear need for quality advice in the equity release market says Elizabeth Boardall. However, how should this be delivered?
Most industry commentators agree that equity release is set for rapid expansion in the future, so as more lenders enter the market the need for quality impartial advice is crucial.
It is reassuring to know that the products available now offer far more choice and flexibility. Moreover, people can rest assured that the vast majority of products must now adhere to strict guidelines applied in the name of treating customers fairly.
SHIP (Safe Home Income Plans), the body dedicated to the protection of plan-holders, education of consumers and the promotion of safe plans has made considerable progress.
The organisation, whose register includes over 90% of equity release providers, has set deadlines by which advisers must gain equity release qualifications. SHIP members also need to pledge that they will offer clear representation in literature, have an independent solicitor and have a no negative equity clause.
Another substantial improvement for the industry (and one that SHIP and Norwich Union have been enthusiastically behind) is the recent regulation of home reversion plans in April 2007. This move means that the majority of the market is now fully regulated by the FSA, and it is widely predicted to expand as an integral part of post-retirement financing.
Because equity release is a specialist area, there needs to be a fundamental shift in the way in which some of these products are sold. This product can potentially impact family relationships, possible inheritances, quality of life, additional income streams such as Government benefits and housing options. In addition, some of the target market is potentially frail and vulnerable.
Therefore, the product needs to be marketed, advised on and provided in a sympathetic way. It is not about selling equity release but about finding the right solution for a potential problem. It is important that the people who take equity release plans out actually derive substantial benefit from them.
Sophia Loren at 73 years old, Sir Alex Ferguson (65) and Michael Parkinson (72) are all eligible for equity release. However, I don't believe that anyone would suggest that they spend their money in the same way. So why should less famous older people?
Indeed, our research revealed a widely different attitude to life and indeed financial planning among the older generation. Those who are now approaching retirement have an increasing 'live for today' attitude while their parent's generation who may have been retired for up to 20 years are keen to leave a legacy for their children.
Another lesson that we need to learn and remember is our route to market. The majority of consumers are more than happy to sort out their finances via phone or internet. However, many people in retirement have more time and appreciate the personal touch. We have found that in this age group, there is a strong preference for face-to-face communication when speaking about financial services. They also have the time to research and consider their options.
In addition to understanding this market, and providing high quality advice, we need to educate consumers. SHIP and providers have been fighting this uphill battle for several years now but we need to keep going.
Talking to consumers about these products is the first step and early indications are good. A recent survey of Norwich Union lifetime mortgage customers found that on the whole they are confident they have a good knowledge of their product. Even better, this research enabled us to see the genuine life-changing impact this product has had on people's lives. This provides a strong foundation on which to build for future customers.
Providers also need to actively work to educate and we are currently launching a informational DVD/video which we believe will help. In addition, we are continually improving our e-commerce facilities to encourage better understanding.
So what does this all mean? In order for equity release to take its place among other post retirement products, we need to ensure that the advice provided is concise, sympathetic, high quality and accurate. We've come a long way, but now it is the subtle changes to our approach and consistent quality that will make the difference.
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