There can be no doubt that the mini Budget rapidly brought forward the situation that we find ourselves in today, but that does not mean that we should be pulling back the drawbridge of advice, when it could be needed the most.
Yet I hear that some advisers have done exactly this, citing: “There will be nothing left for beneficiaries in years to come”. It is important to note that we have been in this position before with interest rates, but in those days, we did not have the flexibilities of today’s plans.
I absolutely agree that the impact of ‘roll up’ interest when rates are high is something of concern and that many potential clients are being put off by the end result in 10 or 20 years’ time. We are quite often hearing from clients that they do not want to make any repayments or simply cannot afford to, but are you the adviser using all of the tools in your armoury?
Reshape the client’s view
The easy thing to do is to agree with a client that does not want to make any repayments at present, whilst the right thing to do is question what the outcome will be in future years and how this sits in reality.
After all, in many cases it will be the family that will receive less money in the future, so shouldn’t they be part of the talks now? Maybe they will want to make at least some repayments now, to potentially get a bigger inheritance later?
It is just as important to show people who are shying away from today’s interest rates that the choices they make now can have a profound impact on the future.
For example, some clients are saying: “The interest rates are too high, and we will move and downsize instead”. Whilst this should always be a serious alternative that should be considered, all too often in reality clients actually want to continue to live in the home that they love and where their best memories are.
Do they want the hassle of moving or leaving behind a neighbourhood that they are comfortable with? Sometimes the answer is “Yes” but in reality, when discussed in depth, the thought of moving is sometimes just too daunting a proposition.
This is where clients need to be challenged on what is most important to them and if they want the best both worlds, they should be shown the benefits of paying for maybe half the interest each month, as then the debt on their property will not double for maybe 25 years, rather than 10.
Of course, these considerations should be weighed up with all other alternatives.
Now is the time for advisers to do what they are best at and show clients what sets them apart from the next adviser, using all of the tools that are available to them.
