With increasing longevity and property values being what they have become, equity release could be a viable source of wealth to supplement retirement. But advisers, on average, only talk to 7 per cent of their clients about it, despite around 30 per cent having total assets under £100,000.
There are clearly challenges – both perceived and real – but if you have a position of an ageing population, insufficient pension funds and locked- up wealth in an asset like property, something has to give, right? Wrong. Two thirds of advisers expect equity release activity to remain unchanged in the coming year, with the rest expecting only a slight uplift.
Indeed, despite rising confidence among over-55s about the role their housing wealth can play to support them financially in later life (new figures from the Equity Release Council found that annual growth in 2017 reached a 15-year high), advisers still see it as a final resort, with many reluctant to advise on it at all.
This is a problem, because independent financial advice is a key part of an equity release sales process, in that all sales must be advised.
So what are the barriers? For many advisers, there are concerns over inheritance as well as the risk of repayments and mounting debt on compounded interest. Clearly, one of the key factors is the relationship between future house price growth, the interest rate on the loan and the period for which the loan runs.
While there is some reason for caution if house prices continue to slow or even stall (as they have done in London), there is still plenty of benefit in equity release – and this goes for buy-to-let investors as well.
But the excuse for many advisers is that they just do not like it. And right there is the power of reputation and the challenges of overcoming all the negative connotations that still exist, but fortunately we have WikiHow – the world’s largest and best how-to manual. Step seven of their guide to overcoming a bad reputation helpfully suggests: “If you are confronted about past deeds, disregard it with a laugh and explain ‘it was just a stage I was going through’ or ‘it was a stupid part of my life I’d rather forget’.”
There you go, Equity Release Council – job done.
Phil Wickenden is managing director of Cicero Research