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Case Study: Greater competition will invigorate equity release

Chris Prior MM blog

The problem: I am receiving more interest in equity release from clients but I feel the lack of competition is holding it back. What is the outlook for the equity release market?

The solution: Certainly, the credit crunch hit providers hard and it would be fair to say that it has taken some time for equity release to recover, however, the figures recently released by the Equity Release Council go some way to underlining the positive drivers that are now shaping the market.

In 2012, the total value of the equity release market increased by 17 per cent up from £788.6m to £925.7m – it will not take a genius to work out that anything close to this level of improvement in 2013 will take the figures through the £1bn barrier.

Were we to see 17 per cent growth this year then I suspect many more potential providers will be taking a long hard look at the sector and potentially not just expressing an interest in equity release but looking for more active involvement.

The sector would certainly benefit from new entrants plus greater competition and choice for customers.

We are not suggesting that the market is anything but small when compared to other mortgage/lending-related sectors however, as has been stated for some time, the underlying demand drivers for equity release are not likely to change anytime soon and therefore, with my prediction hat on, I expect 2013 to be the £1bn year.

What was also pleasing about the Council’s latest figures is the key role that advisers play in equity release. The number of actual plans sold increased by 10 per cent last year and it is specialist, professional, qualified advisers that are making the vast majority of those recommendations and sales.

Indeed, sales via advisers accounted for 91 per cent of the value of all plans sold and 88 per cent of the volume – this is the largest adviser share of the market since this was first recorded in 2003.

The message of the absolute need for specialist equity release advice has finally broken through and is now taken as gospel by the vast majority of potential customers.

I fully expect the numbers delivered by the Council to increase next year such is the belief in this crucial customer need. Indeed, the focus on specialist advice is not just on the equity release product but also, for example, on the legal advice required by customers.

There is also a recognition that not every family solicitor firm has the skill-set to deal with equity release and advisers are helping customers find the specialist firms who can offer much more technical knowledge, support and help.

Groups like the Equity Release Solicitors’ Alliance have been strong, vocal advocates of this approach.

Therefore the future for the equity release market looks much rosier than it did just a few short years ago. The problems facing many people in, or at, retirement such as pension shortfalls, long-term care bills, increased levels of debt, and mortgages not being paid off, will be around for the foreseeable future.

Individuals may have to turn to their greatest asset and access their equity in order to help fund these ongoing and growing commitments, plus there will be many who want to provide themselves with a much more comfortable standard of living in retirement, and equity release can be one of the solutions available.

Advisers will be at the heart of this sector and I suspect we will not just see an increase in providers over the coming twelve months but a similar upturn in adviser numbers as the industry recognises the growing demand for equity release products.

Chris Prior is manager of sales and distribution at Bridgewater Equity Release

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