Mortgage brokers are encouraged to improve their knowledge of the equity release market, although they do not intend to provide product advice themselves.
Experts in the field say all advisors should have a general understanding of loan options later in life in order to identify clients who might be better suited for these solutions than home loans or retirement interest products. only (Rio). In such cases, brokers who do not wish to specialize in this area can set up referral agreements to ensure that their clients can access the right product for their needs.
Even if you don’t know the details, you should have a top-down view
Industry commentators point to a number of socio-economic and demographic factors that have been behind the popularity of loans later in life. They say the market has responded to this growth in demand by offering a wider choice of products with flexible features and more competitive pricing.
All of this has contributed to life mortgages being seen as a more common solution. This then becomes a virtuous circle as freeing up equity must increasingly be seen as an option when brokers and financial planners encounter older clients.
Failure to investigate end-of-life loans could make it difficult to claim that the client received the best advice. For non-specialists, building trusted partnerships with expert advisers will be key to ensuring that clients’ needs are met and that their own regulatory obligations are met.
Mortgage brokers and financial advisers predict that demand for the release of shares is expected to increase further in the coming years. A recent Air Group survey of 400 intermediaries, which includes a fundraising system, a mortgage club and the Air Later Life Academy, found that 90% of those surveyed felt there was a clear and growing need for loans later in life, with 85% expecting established demographics to keep the market vibrant over the next two to three years.
Equity release reviews are pretty basic. We need something better to understand the customers we are dealing with
Knight Frank’s financial partner David Forsdyke believes that as the market continues to develop and evolve, the need for advisers will only increase.
“First, we’re living longer, which means we have to make our finances last a lot longer,” he explains.
“Second, most of the real estate is owned by the elderly. According to the statistics you are looking at, 50 to 70% of all real estate wealth is held by those over 60.
“The third factor is the big change in pension plans over the past 10 to 15 years. We have seen the security and generosity of retirement pensions slowly fade away and they have been replaced by cash buying schemes.
Those with significant real estate want to help younger generations access the ownership ladder
“A lot of research shows that, in general, we are not very good at saving for retirement, so there are people who retire with potentially disappointing funds but considerable real estate wealth. They will have to tap into their real estate assets.
In the high net-value market, other factors are pushing stock release on the agenda, says Forsdyke.
“Those who have significant real estate assets want to help the younger generations access the property ladder. There is a desire to pass on wealth in a tax-efficient manner. We’re talking more with wealth managers and financial planners about the benefits of borrowing money against property.
“By creating a debt on their estate, they reduce the assessed value of the estate. They also pass this wealth on much earlier, which means younger generations can put it to good use, much sooner. “
Although stock release products have evolved considerably over the past decade, there are still only two main categories: lifetime mortgages and home reversion plans.
There are people who retire with potentially disappointing funds but considerable real estate wealth
The former are by far the most popular, the latter representing only a tiny proportion of the market. This is because with a lifetime mortgage you retain full ownership of your property, while with a reversion plan you sell part or all of your home, usually at a price below market value, in exchange. a lump sum.
Most recent innovations have taken place in the area of life mortgages. Flexible options have been added, such as estate protection, which allows borrowers to save a specific amount to be left as an inheritance to their heirs; and downsizing protection, which prevents them from being trapped in a situation where they cannot move to a smaller or more suitable property due to the loan-to-value ratio or the size of their outstanding mortgage balance. .
Many plans also offer flexible withdrawal options so borrowers can borrow as much as they need as they go, paying interest only on the amount they withdraw.
With this greater choice of products and features, the job of the Equity Release Advisor has become more complex. For Air Group CEO Stuart Wilson, it’s not just a question of whether brokers are qualified to provide stock release advice. He believes that much of the knowledge needed to provide high-quality advice is acquired after passing exams.
If you are a stock release advisor, you need to have a good understanding of the wider market in case there is a better product out there.
“The equity release exams are level 3 qualifications, so they’re pretty basic. I think this is bad and we need something better to understand the clients we are dealing with.
“Customers never have binary needs. They often have a number of needs that you have to match with the most suitable product from a selection. As regulations have evolved this industry has been left out, so what you have now is a dysfunctional, silo-driven process. “
Wilson believes advisers should be able to view Rio, the release of stocks and other retirement products side-by-side. Currently, brokers only need standard CeMap mortgage qualifications to advise on Rios, but need specific qualifications for equity release, which creates a lag.
As regulations have evolved this industry has been left out so you now have a dysfunctional and silo driven process.
Victoria Wilson, head of stock release for the Later Life Lending Network, believes stock release advice requires a specialist approach.
She says, “We don’t want people doing it, so we try to make sure we don’t have licensed advisers just for the fun of it. Instead, we really try to make it an educational part of each of our events. We want to make sure all of our advisors know the answer isn’t just a ‘no’ because someone is a little older. There will always be a solution if you take a look at it a little further.
We’re living longer, which means we need to make our finances last a lot longer
Access Equity Release and Your Mortgage Decisions director Martin Wade agrees.
“It would be great if you could advise someone from the cradle to the grave and you could be an expert in all of these areas, but that just isn’t possible.”
But Wade believes all mortgage professionals should understand the equity release market and the opportunities it offers.
“Even if you don’t know the details of the lenders and the placement of individual cases, you should have a top-down view of what’s available. And vice versa: if you are an equity release advisor, you need to have a good understanding of the wider market in case there is a better product out there. “
However, as demand increases, more and more advisors may decide to specialize in long-term lending. This is the view of the Chartered Insurance Institute (CII), one of two organizations that offer equity release qualifications.
We have more conversations with wealth managers and financial planners about the benefits of borrowing money against property
CII’s director of clientele, Gill White, said that prior to Covid, the number of applicants completing the CII share release certificate was around 750 per year. There has been a slight reduction in 2020 and 2021, but numbers are expected to return to pre-pandemic levels in 2022.
She states: “The impact of Covid-19 on the economy and the amount of wealth tied up in property means the number of people seeking advice on releasing equity, and the number of mortgage advisors requiring our certificate. in order to offer them help, only grow taller.