Giving equity release a good name

The equity release industry can boost its image by cleaning up its act and keeping the press updated on the many initiatives that are underway to help clients, says Andrea Rozario

The equity release market has had more than its fair share of bad publicity in recent months, much of it unfair and misleading. This, coupled with compliance issues, long processes and the need to be aware of complex subjects such as state benefits, has led many brokers to steer clear of it.

There is great anticipation over the upcoming results of the Financial Services Authority’s most recent mystery shop, and there’s plenty of frustration among advisers and lenders that want equity release to be recognised as a valuable tool in retirement planning.

The Association of Mortgage Intermediaries’ census on equity release in February showed that 54% of brokers were not offering equity release to clients due to compliance issues and 46% were steering clear due to a lack of training and qualifications.

A franchise system could help resolve the bulk of the compliance issues by offering proven systems, administrative support and guidance. But for the 46% of intermediaries who do not offer advice due to lack of training and qualifications, the onus would still be on them to ensure they take the examinations and spend the time doing the training.

Advisers have to ask themselves – is it worth committing my time to ensure I am up to speed with equity release, thereby ensuring my clients are getting best advice?

A franchise proposition that offers back office systems and administrative support to those who wish to advise on equity release could give an element of confidence to brokers who are in two minds as to whether to enter the market. But the responsibility for the advice would still remain with brokers, which means they would still have to commit to gaining the relevant knowledge and qualifications, and also set aside time to keep up with the latest developments.

Many brokers who come across clients in need of equity release advice pass on their cases to independent specialists. If an adviser has struck up a good relationship with a specialist and has the confidence that their clients are receiving good service and independent advice, every-one wins. Intermediaries do not have to concern themselves with compliance issues, they maintain their reputation with clients, they may receive remuneration for the referrals and other areas of business not undertaken by the specialist can be referred back to the original intermediaries.

Looking at the results of the AMI census, this is the most popular route for intermediaries. Some 60% of respondents say they discuss equity release with their clients and then refer them. Of those referring, 64% refer cases to third party specialists.

When our ageing population, poor pension provision and the rising cost of living are taken into consideration there is no doubt the equity release sector will grow. It is inevitable that some people will have to dip into the equity in their homes to ensure they have a reasonable standard of living in retirement.

Since the previous FSA mystery shop the industry has put in place certain mechanisms to help advisers and consumers. The FSA has introduced a guide for consumers called Raising Money from Your Home and information is available for consumers and advisers on the regulator’s website. The Council of Mortgage Lenders has released good practice notes for those advising on equity release. AMI and the Association of Independent Financial Advisers have launched a portal and guidance notes for advisers. There are technical workshops available from the Personal Finance Society and software has been designed to help with advising clients on state benefits.

But is this enough? There is no mechanism that ensures brokers cover all areas in the advice they give to clients.

Many intermediaries and companies are committed to ensuring quality of advice and their own system to ensure all relevant areas are covered. But when it comes to advisers who do not advise on equity release on a regular basis and do not refer their cases, it is unlikely they can commit enough time to the odd case they come across to ensure they have taken every aspect into account although this is critical to best advice.

Equity release is seen as an emerging market, with those already committed to gaining qualifications and keeping abreast of developments being passionate about serving their clients well. What is needed is for the industry to come together and develop initiatives that give confidence to brokers who want to enter the market and peace of mind to clients. The image of equity release has to be positive, giving clients up-to-date, independent information rather than having them rely on press articles that fill them with fear.

Information can soon be old news as lenders and reversion providers constantly come up with innovative products. It is advisers’ responsibility to keep up-to-date with the latest developments.

Clients must be able to make informed decisions on whether equity release is right for them. They must know what to expect from advisers and what areas will be covered during meetings or conversations. And they need to be able to ascertain if they have been given good advice.

It has been said that one of the problems facing people considering equity release is gaining access to independent advice. This must be addressed.

Clients need easy access to information. There must be a well publicised list of qualified individuals who specialise in equity release. There must be clear advice processes and industry bodies that advisers can turn to when they need guidance. The industry must be seen as working to address the needs of the consumers. And we must inform the press about initiatives and innovations. This will help to prevent misleading articles.

What the industry does not need is another battering from the FSA’s mystery shop results. This would give the press and the consumer associations an excuse to have a field day with what will be perceived to be at best incompetence and at worst a scandal.