I say this because, at the moment, what we’re clearly seeing in the majority of cases in the later life lending space is a consumer demand based on essential need, rather than one built on an aspirational requirement.
That’s not to say that consumers aren’t more willing to look at utilising the equity in their homes to, for example, fund a new kitchen or go on holiday, etc. But at the moment – particularly in this economic environment – there are other more pressing needs which are determining their approach to later life lending.
Borrowing based on essential needs
For instance, there is an increasing number of cases where consumers require funds to pay off the capital after an interest-only mortgage comes to an end, there are more cases where individuals are either looking to pay off debts themselves or are wanting to release equity in order to help family members pay them off. There are also those who sense they will have an income shortfall, especially in the coming months, possibly years, and want to make sure they can cover the increase in their cost of living.
Essentially, it’s a requirement for money right now which will be put towards what they deem to be essential needs, and for some of those customers, it will be equity release or later life lending that will meet this need. The need to access the value tied up in their home can be difficult for some customers to get their heads around, especially if there are no other options. It could mean they are not overly keen on the recommendation and are therefore not as positive about the choice as we would hope them to be.
However, this is where the quality of advice (and the advisers soft skills) are vitally important as this will help them fully understand not only why this is the right option for them but why other options won’t work and how this may change in the future.
Giving the right information
What we don’t want clients to be is uninformed about the changes that could happen to them. Nor do we want them to think the option they chose right now is the one they are ‘stuck with’ forever.
Somewhat ironically, a ‘lifetime mortgage’ doesn’t have to last a lifetime, they are much more flexible than many people believe, and with regular communication and regular advice, there are options to change should circumstances, need and product options allow.
In a true sense, advisers have to look at the situation now but keep one eye on the future. Of course, you can’t possibly predict what will happen, but you can potentially head off problems at the pass, specifically in terms of those clients who might feel under pressure, or might feel they have to act quickly, or might be fully focused on receiving the money and are not thinking of anything else.
Add in the potential for family members to become involved after the fact and this could lead to issues. Indeed, recent data from the Financial Ombudsman Service revealed 62 per cent of all complaints received on equity release were raised by family members or executors. It is something that advisers have to be acutely aware of, as well as issues such potential customer vulnerability.
This might all be ‘business as usual’ common sense to advisers, but we must always consider where potential issues might arise, and where potential complaints might come from – even if they are completely unjustified.
Again, it’s about personalising and tailoring the advice to the individual, making it crystal clear what is being recommended and why, and documenting every stage of those client dealings so you’re able to prove categorically the discussions, the research and the result.
