Nigel Hare Scott discusses how advisers should approach equity release advice.
A colleague of mine often refers to equity release as the "fourth emergency service". It is such an apt description because a good adviser should never forget that his primary duty of care is towards addressing the needs of the public, in this case the elderly, often impoverished, homeowner.
As with other members of the emergency services, when communicating with people, an adviser should focus their attention totally upon meeting immediate concerns, in this case the client's financial needs. When giving advice, an adviser must close their mind to everything else - not an easy thing to do time and time again during the course of a week.
In order to win the confidence of clients in a relatively short timeframe, sometimes only over the telephone, a comprehensive knowledge of the subject and an attention to detail are prerequisites for success. In this context, the achievement of the CII or IFS equity release qualification is only an initial step in building a rewarding career during which an adviser can both earn money and do some good for others at the same time. For the older adviser, it is reassuring that the business tends to be age positive with many advisers continuing past their normal retirement date.
Theory versus practice
There is a large gap between the theory of getting qualified and the practice of acting as a successful adviser. In order to give best advice, an adviser must be fully conversant with the products that are available to the consumer. The equity release exam syllabus provides only generalised information on the key characteristics included in equity release plans with which advisers must familiarise themselves and also keep updated on a regular basis.
Even if an adviser can only recommend products from their own employer or from a limited panel, they should make themselves aware of the alternative plans available. In order to treat their customers fairly, the adviser should make clients aware of any specific drawbacks in the products which can be recommended even if competing plans that might be more suitable cannot be sold. Examples of where this type of conflict might arise could be on loan to value comparisons or early redemption charges.
Most providers will seek to secure a market position by a niche product feature and in this regard, the adviser must be aware of it. It is not good enough to rely solely on a selection of known providers because they have seemingly met the clients' needs in the past. A good equity release advisory firm will have its own product sourcing systems complemented by in-house continuing professional education to assure that the advisers' product information is consistently fit for purpose.
While getting the product sourcing right is critical, it is also important for an adviser to be knowledgeable of the processes which take place between the application stage and the completion of the equity release plan. Many advisers pass the baton to someone else in their organisation after submission of their application. An awareness of what happens next will enable them to brief their clients in advance on the respective responsibilities of the various parties (e.g. surveyors, solicitors and the provider etc) and give reassurance to them that they are available to assist if any problems arise. Progress chasing is also made more effective if the adviser knows the suitable questions to ask the parties involved. By keeping abreast of the status of their cases in the pipeline, advisers will soon learn to recognise the providers with the better service standards.
Armed with a plethora of background information on equity release, comprehensive product knowledge and experience of the conveyance procedures, the adviser will be well equipped for the critical process of making this know-how work towards meeting the client's financial objectives.
Having won the client's trust, the ‘Know Your Customer' phase will normally be documented in specifically tailored fact finds for equity release. In addition to capturing the standard details in respect of residential mortgages, the equity release adviser should give additional attention to:
• The alternatives to equity release.
• The possible effects on the value of the estate.
• The variation in the amounts which can be raised due to poor health.
• The possible impact upon means tested benefit entitlements.
Equity release is sometimes regarded as the opposite to the first time buy. In other words, in respect of several equity release products, it is the final plan that the homeowner will enter into and which is designed to last for the rest of their life.
It is important for an adviser to bear this longevity in mind when making recommendations because the potential for a misselling claim in the future is greatest on those products with uncertainties at the outset. The concise and transparent disclosure of the client's preferences is vital, particularly as any complaint might be many years ahead. Thus the fact find and supporting papers must evidence clearly why a particular product was recommended and demonstrate that the client was aware of any potential downsides associated with it.
Although our clients cannot yet dial 999 for the ‘fourth emergency service', equity release advisers should prepare themselves for action. By applying the professional skills gained from their extensive training and experience, they will be well placed to give effective ‘financial first aid' to elderly homeowners in retirement.
Nigel Hare-Scott is managing director at Home & Capital Advisers
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