Later life lending specialists may struggle to capitalise on growing demand for advice unless they invest in artificial intelligence and improve the efficiency of their businesses, according to Air chief executive Will Hale.
Speaking at the Air Evolve Summit earlier this month, Hale warned that the sector faces a potential capacity problem as increasing numbers of older homeowners consider using property wealth to support their retirement finances.
Air’s figures show that fewer than 2,000 advisers have completed more than one equity release case during the past 12 months, raising questions about the industry’s ability to accommodate a substantial increase in business.
The concerns come amid projections of greater demand for later life lending. Research cited by the Financial Conduct Authority suggests that 51% of households aged 60 and over could benefit from accessing housing wealth through later life lending by 2040.
Separate research from the Pensions Commission indicates that around 15 million people are saving insufficient amounts for retirement, potentially increasing reliance on property equity to supplement retirement income.
CAPACITY CHALLENGE FOR ADVISERS
Hale (pictured) argued that specialist firms need to examine their operating models before demand increases, rather than relying on advisers to manage larger caseloads using existing processes.
He said: “If more advisers start identifying later life lending needs and more customers begin to consider housing wealth as part of their retirement planning, there is a significant opportunity for specialist businesses to grow.
“But that opportunity only matters if you have the capacity to deal with it and to do so profitably.”
Hale said firms should identify opportunities to automate administrative work, improve referral processes and reduce the time spent on activities that do not require an adviser’s direct involvement.
He added: “We will not meet an exponential increase in demand by asking advisers to work longer hours and simply to handle more cases in the same way.
“We will need technology that removes friction, processes that stand up to scrutiny and more advisers that understand the value of comprehensive conversations and deep customer relationships.”
AI’S ROLE IN FINANCIAL ADVICE
Rather than viewing AI primarily as a threat to adviser employment, Hale suggested that the technology could help advice firms reach more customers while maintaining the personal relationships required in complex later life lending cases.
He said: “I don’t believe AI means replacing advisers. Indeed, in my opinion, AI could be the catalyst for the advice sector to finally realise its full potential, opening up the ability to engage more customers, increasing accessibility through reducing cost and allowing advisers to differentiate their proposition compared to execution-only and exclusively tech-driven models.
“Those who embrace AI and commit to embedding it throughout their business and constantly refining its application may well gain a sustainable competitive advantage.”
The Air Evolve Summit brought together later life lending specialists, mainstream mortgage advisers, independent financial advisers, lenders and other industry representatives to examine the practical applications of AI in financial advice.
Discussions covered opportunities to reduce administrative workloads, improve customer communications and increase efficiency, alongside the risks and limitations associated with adopting the technology.
The event followed the publication of the FCA’s Mills Review earlier this year, which identified AI as a potentially defining influence on the future of retail financial services.
