More 2 Life managing director Jon King says he has seen equity release go through more than its share of difficulties in the 20 years he has been involved in the business but after weathering the latest round of difficulties, he has high hopes for the future.
King entered equity release in 1991 when he became managing director of specialist equity-release broker Hinton & Wild when it was bought by his then employer Ecclesiastical Insurance Group. In 2000, he moved to Hodge Equity Release as managing director and also became chairman of Safe Home Income Plans, which he led for seven years.
“Twenty years ago, we had just come out of what was probably the blackest period since the industry was launched in the mid-60s. The business really needed a shot in the arm to remind people what was safe about good schemes and that was what Ship was all about and it was a pleasure to be involved in that in the early days. Ship can take the credit for really reinvigorating the business, albeit from a really low base.”
King points out the size of the job done by Ship, saying in 1995 there was only £50m lent in equity release compared with the present £1bn.
After a tough last few years, he says recent business figures suggest equity release has turned the corner.
“In the last quarter of last year, lending figures were higher than at any point in the last two years and we are seeing product innovation coming through.”
King’s time in the industry coincides neatly with the 20th anniversary of Ship, which recently announced that it would be broadening its membership to include advisers. King says this is a welcome and necessary development.
“I think it is very poignant to chose this year, its 20th anniversary, to launch itself into a brave new world of equity release, with members coming from right across the industry, and I am hopeful that this heralds a new future and a new visibility for equity release across government.
“We are seeing signs of that. Martin Wheatley at the FCA has already started to flag his interest in this area. If we can get the message across to clients that we are open for business and the products are there, which I think is the role of Ship as well as courting government, we will see further growth.”
King retains his enthusiasm for equity release. “I still enjoy it, the day I stop enjoying it is the day I hang up my hat.”
He says the industry is changing from the traditional market of providing a source of income for pensioners. Hand in hand with this is a change in the sources of funding. King says after the withdrawal of many traditional equity release lenders in the last four years, lenders are starting to come back into the market, with annuity providers a potential new source of funding.
“Over the next 12 months, some of the funders who are starting to look more actively will start to come through and fund new product design and more innovation.”
He says Solvency II is promoting interest among some annuity providers. “There is a chicken and egg argument, which is that it is only a £1bn market. If it was a £10bn market, perhaps the really big lenders would get a bit more interested but you are getting a lot of annuity providers that are thinking these assets are very attractive.”
He says More 2 Life is particularly well placed to take advantage of the growth in new funding as many of the new sources of funding are happy to get into the market without having to design and market their own products. As a result, More 2 Life’s business model as a “lender in a box” should come into its own.
“We take other people’s funds, that is, life companies, building societies, banks, closed annuity funds, anyone that is interested in acquiring assets in equity release, and what we do is package those for them. We design the products, we do all the regulatory work, we do the marketing, distribution, the lot.”
More 2 Life has seen rapid growth in the past two years and King says this has been due to its innovative approach to lending. “We have just under 10 per cent of the market, which I am delighted with. The next milestone is 15 to 20 per cent share but to do that we have to bring in new products.”
Last month, More 2 Life substantially increased the rates available on its impaired product and King says the business will continue to expand its offering. “We are confident that later this summer we will be launching another product in another niche within equity release. It is still at the build stage, so no details are available at the moment and we have plans and aims to launch a third new product by the end of the first quarter next year.”
The drive for new products is where King sees the industry finally being able to open the door for the growth that has long been predicted. Another potential driver for growth is the long-term care market but King is less positive about this.
“It is a bigger challenge because equity release has always been about staying in your own home. Most people find the idea of going into a home unattractive so they are looking at other options, so that is opening a door, but there is still a long way to go before equity release is the answer or even part of the answer.”
When King was interviewed by Money Marketing in 2009, he predicted the equity-release market would grow to £5bn over the following five to 10 years. “I still hold by that. What has happened in the last five years is we have had the biggest credit crunch, so if someone will allow me an extra couple of years on that prediction I would be grateful but I am still reasonably confident we will get there. It is not a big number when you look at the housing wealth in the UK. It is much more about client perception, clients’ access and understanding. The industry is working hard on that and will continue to work hard and I will do my bit.”
Born: Bolton, Lancashire
Education: BSc in economics, University of Reading, Manchester University Business School
Career: 2010-present: managing director, More 2 Life; 2000-2010: managing director, Hodge Lifetime; 2000-07; chairman, Safe Home Income Plans; 1991-2000: Ecclesiastical Insurance Group, managing director, Hinton & Wild; 1989-91: head of intermediary sales, Pearl Assurance; 1986-89: Clerical Medical; 1985-86: life inspector, National Mutual Life
Likes: Hill walking, cars and a drop of single malt
Drives: Mercedes SL
Book: Papillon by Henri Charriere
Album: Darkness on the Edge of Town by Bruce Springsteen
Career ambition: To see equity release enter the mainstream
Life ambition: To help my children reach their full potential
If I wasn’t doing this, I would be…A farmer