We have a theoretical seller’s market for equity release at present given that interest rates, investment returns and annuity rates are all at historically low levels.
The savings gap is also widening as people are living longer and elderly inflation is well above the normal published indices.
Add into this the not unsubstantial fact that we’re in possibly the worst economic recession for 75 years, and you may understand why now could, and perhaps should, be the time when demand for equity release is at an all-time high.
Given the social and economic factors that have been mentioned above it would be fair to think that the equity release market is growing exponentially. And yet this is not the case.
So, why should this be? Well my contention remains that there are many millions of over 55s who may benefit from exploring equity release as a means of raising additional funds but the reasons they do not is they are either frightened of equity release, they don’t understand it or they simply don’t know where to get advice from.
The final point is a major bug-bear given that if all financial advisers promoted the sector and their advice services effectively to their over-55 clients (and their children) then I believe we would see a massive uptake in those taking advice on equity release.
One rather large issue of course is that most advisers aren’t suitably qualified or don’t have the right permissions to offer equity release advice.
This, however, is not an insurmountable problem, indeed the entire sector would still benefit greatly from advisers either proactively promoting their equity release advice services, or if they are not authorised or qualified, simply acknowledging that they can still help by referring potential clients on to those who are.
No adviser is an island and even if a firm is unable to provide the equity release advice themselves, a referral agreement ensures the client is looked after by a specialist and the firm themselves can pick up referral income.
There is a real onus here on the specialist equity release advisers to go out and actively form alliances with other advisers and firms who can provide referrals. The best way to achieve this is for equity release advisers to have business to business conversations with potential introducers, covering areas such as fee/commission splits, timely reporting of outcomes from leads given, non-cross selling agreements and customer segmentation.
This final point is crucial. Many advisers are reluctant to refer their clients as they are fearful of losing control, plus they have worries about the suitability of the equity release advice, and/or that their clients might be ‘poached’ or even mis-sold to.
Talking about customer segmentation is a good way of alleviating many of those fears. All this involves is asking an introducer to outline their core advice offering and then describe customers that fit the profile for that advice, followed by the question: ‘Do you know within the client bank which clients are which?’
I guarantee that most times this conversation is had there will be an element of the client bank that neither wants, needs or can afford the adviser’s core services. If these clients are then segmented by age there is no risk to the introducer allowing an equity release adviser a marketing opportunity with the over-55s.
Working jointly on these marketing opportunities is crucial in order to make the introducer model work. Think of this like retailing. The introducer is like a shopkeeper with footfall through his store but the stock on the shelves does not suit all the passing trade who either don’t want or can’t afford it. The equity release adviser is effectively adding new ‘lines’ to the firm which don’t compete with the existing ones but crucially do provide additional revenue.
Equity release business is not going to simply walk through the door and present itself to the adviser. However, I guarantee other advisory firms in your area regularly speak to clients for whom equity release may be suitable, however, they are not in a position to advise them.
This is where the equity release advisory firm has to get active and begin making those relationships and outlining how the arrangement would work in practice. The market is there but advisers have to go looking for it.
Peter Welch is head of sales and distribution at Bridgewater Equity Release