Improving consumer understanding and dealing with issues around vulnerability are critical if the later life lending sector wants to meet increasingly complex needs in retirement. That was the view of delegates who took part in a recent roundtable, following the publication of BestAdvice’s Later Life Lending report.
Darren Amos, a financial adviser at Anstee & Co, has focussed on equity release for several years. For him, it is possibly the most rewarding area of finance advice to be involved in.
“It’s as much the response you get from clients when you actually help them out,” he notes.
“The main issue I find is getting that message across in the first place.”
For Amos, one of the main differences between operating in the later life lending space and the mainstream mortgage market is consumer understanding.
“You almost have to re-educate clients that equity release is just another mortgage and that it has a place in their lives,” he says.
“There’s a mental barrier that comes from the historic horror stories in our market from 15-20 years ago, perhaps when people lost their houses and the families didn’t know about it until after the event.
“Then you have to really be keen to bring in other family members, so they don’t later on think you’ve done something you shouldn’t have; they may also have their own biases and prejudices against the equity release.
“You need to be prepared to just talk it through and understand that the process is slower. In many cases with a normal mortgage, I might have a one meeting with people and a few conversations on the telephone and the rest is all done without them being part of the process. With equity release, several meetings involve usually long discussions about the pros and cons of what you’re doing because, although there are ways out of it, we’re really all talking about something that should be thought of as a once in a lifetime decision.”
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Chris Flowers, head of intermediary sales at equity release provider Pure Retirement, has spent a decade in the later life arena, with four of those spent advising. He echoes the point regarding education.
“You’d like to think that when most clients come to see you about a normal, residential mortgage they kind of understand how it works: you buy a house, you make a monthly payment. After the term, it’s all paid off. With equity release, you’ve got to factor in that a lot of the clients don’t really understand how it works. And when they do understand how it works, then they’ll make an informed decision. It’s also more emotive decision compared to a mortgage.
“There are other factors to consider, such as care funding. You wouldn’t really speak about it to a first-time buyer. With them, the conversation wouldn’t be nearly as in-depth as if you’re speaking to a client in their 50s or 60s.
“You also have to consider that their age does not mean that they are going to vulnerable, but does mean that you have to make sure that the right steps are taken. We have to make sure that they are of sound mind.”
“You need to be much more skilled in managing your clients’ expectations and balancing a whole series of different and potentially conflicting issues,” adds Jim Boyd, chief executive of the Equity Release Council.
“You need to balance short-term needs to each of the long-term needs and recognise that needs of people change over the course of their retirement.
Typically, an early retiree might be looking at capital to enhance their retirement or maybe even repay debt. Or they could even seek a lifetime improvement through travel, all sorts of aspirational needs.
“But of course that changes over the course of someone’s lifetime because either they die or are in ill health. And then, as Chris said, you have to actually look at completely different issues like care.”
Boyd argues that the equity release sector needs to evolve its digital capability and marketing: “We’ve seen a greater use of websites and social media during lockdown,” he says.
“I think that’s the direction of travel that we ought to go down, given that people aged 55+ are now just so much more internet confident.
“As an industry there’s a challenge there to service that, through the needs of consumers, supporting the customer journey, and again, with education. And then obviously to support advisers
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