For years equity release has been viewed as a risky product that should only be used as a last resort. Horror stories abound of people who have taken out products such as rent and leaseback schemes only to find themselves drowning in debt. Given these stories it's fair to see why advisers have been loath to recommend equity release products to their customers in the past.
However, the equity release industry is very different now. The emergence of trade body Safe Home Income Plans (SHIP) has done much to raise standards and customers have the security of "no negative equity guarantees" when dealing with SHIP members.
However, old perceptions still persist and clients and their advisers still remain hesitant when looking at equity release products.
Looking at today's retirement patterns there does seem to be scope for equity release to play a real part in people's retirement planning. Far from being a product to be resorted to in dire straits, people can release equity from their homes to improve their standard of living through home improvements or even financing holidays. Highlighting these positive messages will be a challenge for the industry going forward. In this issue a panel of experts discuss the prospects for the future of equity release and ask how it can be used to meet people's evolving retirement needs (pp36-44).
In addition to helping clients pay debts, afford home improvements or go on holiday the panel also discuss how equity release can be used to top up pensions or even do inheritance tax planning. The possible advantages to the adviser are also touched upon as equity release could become a useful area of expertise for advisers specialising in mortgage advice. The thinking behind this is that while the credit crunch may affect the amount of mortgage business these advisers write they can supplement this shortfall by advising on equity release.
However, while we may soon be entering something of a golden period for equity release it is important to realise that these benefits will not be realised if advisers and their clients continue to avoid looking at equity release. The industry needs to separate itself from these old perceptions and highlight the good news stories of how equity release has helped their clients. Those considering equity release also need to know where to go to access the best possible advice in this area. It is only when people's perceptions of equity release begin to change that we will see a real long term expansion within this industry.
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