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NU hits back at claims that direct clients are losing out

Norwich Union has rebuffed claims that dealing direct with lifetime mortgage providers costs consumers more and says many borrowers prefer to deal direct with providers rather than IFAs.

Key Retirement Solutions has calculated that customers pay 5m more in interest annually by buying products directly from companies rather than seeking independent financial advice.

It justifies this figure by pointing to the disparity between the types of products taken out by customers advised by product providers compared with those going through advisers.

Figures from Safe Home Income Plans show direct providers sold just 5% of drawdown products in Q1 2006.

A drawdown facility allows consumers to take an agreed sum over a specific period, and while they are not right for everyone, KRS says they have the potential for significant savings over the longer term, given the right circumstances.

Dean Mirfin, business development director at KRS, says: “The considerable gap between the number of drawdown mortgages sold direct to customers by providers and those sold via IFAs is a huge worry.It shows the need for consumers to get independent advice before they buy such products.”

KRS is calling on the industry to take note of the discrepancy and ensure that all consumers are able to access the entire suite of equity release products before buying the plan that is best for them.

But Brendan Kearns, propositional development manager at NU, says: “The type of customer interested in equity release is unlikely to have a lot of the liquid cash that is the bread and butter of intermediaries. They may not have access to independent financial advice or might be uncomfortable with the advice process offered by intermediaries. At NU we look at customers’ product needs for between three and five years and advise on that basis rather than advising they take the maximum available.

“This should be a customer choice issue. What’s right for one isn’t right for the next. Many customers aren’t keen on drawdown and would rather take lump sums.”

NU will be launching its own drawdown product within the next month.

HSBC was the subject of criticism earlier in the year after it decided to refer all potential equity release clients to In Retirement Services.

Ged Hosty, director of IRS, says: “The issue is not the distribution method but the product offered.It is in the customer’s interest to defer drawing down for as long as possible and at IRS, where we have a direct sales model, we have offered flexible schemes for a number of years.

“This means that at 30,000, our average customer advance is significantly below that of the rest of the market where 50,000 is more usual. But this is to the benefit of our customers.”

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