Advisers need to provide a ‘Comprehensive Conversation’
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We always used to say that equity release or lifetime mortgages ‘punched above its weight’ in terms of the general ‘noise’ the sector was able to make, the focus and coverage it received, and quite frankly, the attention it got.
Perhaps that had something to do with its unique status, the fact it seemed to differ so markedly from the mainstream mortgage market, that it required separate qualifications and training to advise upon, or indeed that it seemed to operate in a very different space to the business most mortgage advisers were writing, and most mortgage borrowers were focused on.
However, as time has progressed, what seemed like a very strong demarcation line between the work of the mainstream mortgage adviser and those of the equity release specialist has begun to blur, to such a point where we now have a wide range of products which not only sit in both ‘camps’ but actually straddle them.
That is very important – particularly in a Consumer Duty environment which puts great emphasis on delivering a good consumer outcome and which therefore puts the emphasis on advisers being able to provide the right advice and recommendation from across the entire spectrum of products available.
It is undoubtedly why we now speak about later life lending, later life customers or borrowers and the later life sector as a whole – not just equity release – and it is why we should now be looking at the needs of ‘older borrowers’ not just within the context of later life lending, but also in terms of the mainstream – if that is the most appropriate solution for them.
In that sense it does create the need for, something we have called, a ‘Comprehensive Conversation’ by advisers with all clients which covers the whole range of options available to them, whether we consider them to be a later life customer right now, or whether we see them as such in the future.
How many clients in their 40s and 50s have you seen over the last 12 months? How many first-time buyers in their 30s whose mortgage term, at the moment, will extend well into later life? How many clients have you seen in their 60s and 70s who either have mortgages or want to explore how they extract some of the value out of their homes in order to meet needs or ambitions?
We can all see that we’re a long way from a market, a society, an economic environment where a mortgage is granted to someone in their 20s and 30s with the expectation of all concerned that this will be paid off by retirement, at which point they will probably downsize, freeing the equity they have accumulated, and moving into a bungalow somewhere by the sea.
That might be the case for a small number of customers, but what is more likely to be the case is a much more complicated state of affairs, with changing needs and circumstances throughout the life of that mortgage, which will need a focus on the here and now, but also one eye focused on what might happen later in life, what products might be suitable then, how you might move clients into those products, and what is likely to be the eventual exit strategy.
There’s a very good reason why we have a growing variety of mortgage options in this space, from traditional mortgages for the over-50s, to equity release, to RIOs, and the new ‘breed’ of lifetime mortgages – payment term and optional payments.
The reason is that a ‘one size fits all’ product choice isn’t appropriate, and what is also not appropriate is for advisers to be effectively hamstrung and constrained by the products they can and can’t recommend.
Now that doesn’t necessarily mean individual advisers have to have the necessary authorisations and qualifications to carry out all this business but it does mean being able to work through the options available, to recognise which one might be appropriate, and to effectively ‘triage’ the advice and refer to those who can advise on this business.
For those who fit this latter description, there should definitely be a consideration of what services they are capable of providing now, and what they might be able to achieve in the future. Let’s be frank, later life lending is a sector which is only going to continue to grow, with tens of billions of lending available to advise upon. Why not be the adviser of choice for those customers?
To enable this, we have produced a series of tools, systems and platforms, which are designed to make that advice process as simple as possible, from our Academy to secure the ongoing knowledge, to our Navigator tool which supports advisers to consider all affordability and product options, to WriteRoute to access the factfind with vulnerability and affordability at the forefront, and Sourcing to find a suitable product and write the business.
The point is that advisers have everything available to them right now to either ensure they can cover off the entire market, or to start making that move, and to start having those comprehensive conversations. Securing clients for life means providing advice for now and later life – and there is no time like the present to put this into practice.
Stuart Wilson is Chairman of Air Club
First published in The Intermediary on 1st February 2024