Amid growing demand for equity release lending and RIO mortgages, we investigate why there is much more to advising in this market than passing the necessary exams.
The boom in equity release lending and the recent flurry of activity in the retirement interest-only space has left many mainstream brokers wondering whether it is worth taking the specialist qualifications needed to advise on lifetime mortgages.
But even for those brokers who decide against taking these extra exams, there are plenty of referral opportunities that will generate an extra income stream while also ensuring that clients get the most appropriate specialist advice for their needs.
In March, the FCA redefined retirement interest-only mortgages as mainstream home loans that no longer require brokers to have specific equity release qualifications. But there remains debate on whether brokers can provide the best advice to borrowers without analysing the products alongside lifetime mortgages.
Yet with equity release lending in the first quarter at more than double the level seen during the same period two years ago, the sector is rapidly becoming too big a force to ignore. The Equity Release Council’s figures show homeowners withdrew £10 million in housing wealth every day in Q1 this year compared to just over £4m a day over the same three months of 2016.
For those wanting to tap into this market, the exams are not the main barrier to entry. There are two options – either the Certificate in Regulated Equity Release from the London Institute of Banking and Finance (formerly the Ifs school of finance) or the Certificate in Equity Release from the Chartered Insurance Institute. Experts say both options are equally good and it should take only a few weeks to prepare if studying full-time, or slightly longer if juggling alongside work. The study materials and exams cost a few hundred pounds in total, with the LIBF exam at £200 and the CII option at £190. But those with experience of equity release advice say passing exams is just the beginning; achieving and maintaining real competence takes far more time and effort.
One firm venturing into this arena for the first time is Your Mortgage Decisions, which Mortgage Strategy can exclusively reveal has just launched a specialist arm called Access Equity Release. The directly authorised broker, founded by Dominik Lipnicki and Martin Wade, has recently hired David Forsdyke and Kevin Stelfox to look after this side of the business. Access Equity Release is currently a trading style of YMD, but there are plans to spin it off into a separate company.
Forsdyke, who is the development manager for the new equity release business, has worked in both the advice and lending side of the sector as well as at the FCA, where he was a senior associate. Most recently, he was head of compliance at Retirement Advantage, and he was also a member of the ERC’s standards board for two years, where he maintains an advisory role.
Stelfox joined as an adviser development manager to run the telephone-based advice team. He is well known in the sector, having worked in equity release advice since 1998, most recently at Key Retirement Solutions. Access Equity Release is in the process of recruiting advisers and will have 10 in place by next month. By September, the directors hope to double this number to 20 brokers, some of whom will offer telephone-based advice and others will be on the road to visit clients in their homes. The broker has already signed a deal with a major trade union, as yet unnamed, to provide equity release advice to its members.
Lipnicki says: “It’s all about setting up life-long relationships with clients. It is not about volume or seeing 10 clients a day. It is about taking the time to make sure that you provide what the client needs and deliver the right advice.”
He is ambitious for the new venture. “We are excited as we think this is the place to be right now. There is huge growth potential and the market is only scratching the surface. Over the coming months, we hope to set up an academy to train even more advisers. We want to be a top-ten equity release adviser in six to 12 months, and then top five as soon as we can after that.”
For those who have passed their equity release exams and want to start building a business in the sector, there is support available. The Later Life Academy helps brokers new to the world of lifetime mortgages to gain a better understanding of all the other advice considerations that need to be taken into account when speaking to a client about equity release.
Managing director Stuart Wilson says: “It’s like when you pass your driving test and the examiner says ‘Well done, off you go.’ It’s only then that you really learn how to drive.”
He explains that the academy takes advisers through the next steps so they can understand the crossover with other product areas and the potential impact on benefits or care. He says: “We help the adviser understand all the relevant elements so they are well rounded. Otherwise there’s a danger that, if they work in silos, they will ignore other product areas to the detriment of their client, which could have drastic ramifications.”
Wilson is also concerned that advisers who offer retirement interest-only mortgages to their clients should have a similar awareness of these issues. He says: “We are looking at launching a series of training initiatives, primarily with lenders that do retirement interest-only mortgages. We strongly feel that there is a potential horrible consumer danger, and I’m playing devil’s advocate here, that customers could get advice on a retirement interest-only mortgage without getting information about equity release, hybrid solutions or bridging finance.”
Meanwhile, plenty of other brokers, even those who have passed their equity release exams. prefer to refer business onto a specialist, explains Key Retirement Solutions director Dean Mirfin. This is due to the high cost of generating leads and the fact that, unless a broker is regularly advising on a decent number of equity release cases, it is difficult to maintain competency and up-to-date product knowledge.
Plenty of brokers prefer to refer business onto a specialst
Key Retirement passes 50 per cent of the procuration fee it receives back to the broker when referrals complete. Proc fees on equity release can be anywhere between 1 and 2.25 per cent, reflecting the fact the research process is more time-consuming than that for mainstream home loans.
Mirfin says: “If you go back 10 years, a lot of people did the exams but many have not been able to generate the level of activity they wanted, so they refer to us instead. Some of the networks, for example, will only allow advisers to carry out equity release business if they have a certain minimum number of cases a year. But brokers who have done the qualification do not see that as a waste of time because it means they are still able to engage with customers really well.
“With the introduction of RIO mortgages, they can ensure they have a good handover if passing clients over for a lifetime mortgage when that is more suitable.”
Not everyone is thrilled about the large number of advisers looking to sit their exams. Teesside Money director Steve Paterson is concerned about the equity release market being overwhelmed by novice advisers who could damage the good reputation that the sector has fought so hard to rebuild after previous scandals.
He says: “This is a specialist field, in which many clients are potentially vulnerable, which is why the current trend to seek work in the sector concerns me. Worryingly, the current push towards flooding the market with newly qualified, inexperienced advisers, who are being encouraged to approach consumers and conclude business by phone and or mailshots, may undo a lot of this recent good work.”
Paterson argues that equity release advice should be conducted face-to-face and says he always visits clients in person.
“During one of my visits to an 84-year-old gentleman, it became apparent that he had problems. He presented on the phone very well but when we met it became evident that his memory was failing. When I asked if he had any family nearby, he said his parents lived just around the corner and it dawned on me how very, very careful we need to be when working in this important area of financial services.”
Few in the industry would deny the growth potential that good equity release advisers look set to enjoy. However, the advice from those already experienced in this market is clear: tread carefully and, if in doubt, seek partnerships with other skilled professionals who can help to guide you along the way