Think about the last sales person who impressed you while making a major purchase of your own. Now ask yourself why you didn’t invite them round to dinner the weekend after? The point is that consumers want quality advice rather than a new best friend and therefore advisers should not shy away from displaying ‘tough love’ to their clients in order for them to get the most suitable and appropriate product.
The very best equity release advisers aren’t uncomfortable questioning customers about difficult subjects and challenging their views in order to make sure the advice received is ultimately aligned to the customer’s needs.
Let’s take the subject of home reversion plans as a good example. It’s not uncommon for advisers to be greeted at a prospective customer’s home and before they’ve had a chance to sip the cup of tea they’re being told, “I’ve done my homework and I don’t want one of those reversions”.
This is not an uncommon response as home ownership is such an emotive issue in the UK, particularly with the 65-plus age bracket, and, for many customers, home reversions are not appropriate.
However, at this stage of the meeting can the adviser be absolutely certain that a particular product solution is not appropriate? Definitely not but there are still too many advisers who might well say: “That’s okay, I’ll make a note of your views and I won’t talk to you about them”.
This is clearly unacceptable and the adviser is sure to gain more respect from the client if they don’t get drawn on this comment but instead focus on gathering the relevant information to make a recommendation, assuming of course equity release is appropriate in the first place.
This same customer may well go on to say they have a positive view on their life expectancy and they’re not sure what will happen with house prices in the future. They may also be looking to guarantee an inheritance for their estate or the certainty of future releases in the future.
For this client, a reversion plan then becomes highly appropriate as it can protect the customer from the risk of living too long and of house price increases not keeping pace with interest accrued on a lifetime mortgage. Also the percentage of the property not sold is guaranteed to pass to the estate once the property is eventually vacated or it can be used to draw down further releases by selling an additional percentage of the property.
Customers will certainly respect an adviser’s bold recommendation when it is clearly the one best suited to managing the customers’ risks, and giving the highest probability of meeting their needs and aspirations, even when it may not be the advice the customer ‘emotionally’ wanted to hear.
After administering this piece of tough love to the customer it’s imperative to back it up with some fact-based details to re-assure them that given their priorities this is the best course of action.
For example, with the reversion example highlighted above, these could be points such as:
• The property will remain the customer’s home.
• An explanation of the value and security of a lease for life which allows customers to remain in their home rent free for life or until moving into long-term care. Customers could be asked what it would cost to rent their own home for the rest of their lives?
• Outline how legal title and beneficial interest are different. The monetary value of the property is held as beneficial interest with the customer’s proportion held by them.
• A partial reversion can give certainty over the proportion of the property left to the estate subject to the customers not selling the rest of the equity at a future time.
• Depending on the provider, additional releases are guaranteed for the life of the plan regardless of what happens to property prices up until the customer has sold the full 100 per cent to the reversion provider.
Advisers who have conviction in their recommendation and the knowledge to back it up will reassure customers who will continue to give their business to advisers who tell them what they need to hear rather than what they want to hear.