The wave of publicity around the financial services offering to older consumers last year has prompted the FCA to act with the publication of its discussion paper, Ageing population and financial services.
It was perhaps inevitable that the regulator would look to secure the views of financial services stakeholders when it comes to the older client because, in the past couple of years, there has been so much change in this area.
For example, the much-heralded Mortgage Market Review was designed to be the new line in the sand for the mortgage market and for older borrowers it certainly appeared that way. Many individuals who could previously secure finance were somehow frozen out by over-zealous underwriting and a steadfast commitment to the letter, rather than the spirit of the rules.
Thankfully, lenders have been rather less strict in the past 12 months but we still face a situation where many credit-worthy older borrowers are unable to secure the mortgages they need. Most would accept that something has to change. Indeed, in a recent panel discussion at our annual conference, all four lender representatives suggested there was likely to be some major movement this year in the lending into retirement sector.
One suspects this will be around the way they deal with older borrowers’ affordability, while also looking at at the options available to borrowers coming to the end of products such as interest-only mortgages. There is already a move towards mortgage/equity release-type hybrid products and it will be interesting to see how these eventually look.
Overall, however, there is plenty to suggest that the financial services market for older consumers needs work. The pension freedoms, for instance, which were designed to provide far greater choice for individuals in terms of how they accessed and used their retirement income, have perhaps unsurprisingly complicated matters.
But there is also a wider issue to be addressed in terms of older consumers’ access to advice. In the mortgage market, there isn’t such an issue because it’s a transactional process where commission is paid, and adviser fees are often not. In the IFA/later life advice landscape, things are much more complicated. We appear to have reached a point where those who need advice the most, are either not wanted by the adviser because they won’t earn enough from them, or the potential client is simply unwilling or unable to pay the fees.
Guidance, via the Pension Wise service, was supposed to be a halfway house for those reaching retirement but take-up has been poor, and it still does not solve the issue of actually securing a recommendation from a professional adviser. Guidance can show you some of the options but can’t actually provide the advice you would need.
Perhaps, what would be important from this Discussion Paper is a commitment to flexibility and adaptable products, which can shift and change to be able to morph into something else, should the needs of the customer change. It’s from such a recognition that we might be able to get a financial services market which is fit for purpose throughout the life of the individual rather than having clients purchase something which is defunct as soon as they turn a certain age.